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0001015402-99-000281.txt : 19990329

0001015402-99-000281.hdr.sgml : 19990329

ACCESSION NUMBER:

0001015402-99-000281

CONFORMED SUBMISSION TYPE:

10KSB

PUBLIC DOCUMENT COUNT:

36

CONFORMED PERIOD OF REPORT:

19981231

FILED AS OF DATE:

19990326

FILER:

COMPANY DATA:

COMPANY CONFORMED NAME:

CENTRAL INDEX KEY:

STANDARD INDUSTRIAL CLASSIFICATION:



ABACAN RESOURCE CORP

0001001084

CRUDE PETROLEUM & NATURAL GAS



[1311]

IRS NUMBER:

FISCAL YEAR END:



000000000

1231



FILING VALUES:

FORM TYPE:

SEC ACT:

SEC FILE NUMBER:

FILM NUMBER:



000-26796

99574453



BUSINESS ADDRESS:

STREET 1:

STREET 2:

CITY:

STATE:

BUSINESS PHONE:



407 2ND STREET S W

SUITE 1600

CALGARY ALBERTA CANA

A0

2817210552



MAIL ADDRESS:

STREET 1:

STREET 2:

CITY:

STATE:





10KSB

1





10KSB



407 2ND STREET S W

SUITE 1600

CALGARY ALBERTA CANA

A0



================================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

---------------------FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

COMMISSION FILE NUMBER 33-99978

ABACAN RESOURCE CORPORATION

(Name of Small Business Issuer as Specified in its Charter)

ALBERTA, CANADA

(State or other Jurisdiction

of Incorporation or Organization)

SUITE 699, 3050 POST

(Address of Principal

(713) 479-9770

(Issuer's Telephone



(I.R.S. Employer

Identification Number)



OAK BLVD, HOUSTON,

Executive Offices)



Number,



Including



Area



TEXAS



77056

(Zip Code)



Code)



Securities registered under Section 12 (b) of the Exchange Act: None

Securities registered under Section 12 (g) of the Exchange Act: Common Stock,

without par

value

(Title of Class)

Check whether the Issuer (1) has filed all reports required to be filed by

Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such

shorter period that the Issuer was required to file such reports) and (2) has

been subject to such filing

requirements for the past 90 days.

Yes

X

No

Check if there is no disclosure of delinquent filers in response to Item

405 of Regulation S-B contained in this form, and no disclosure will be

contained, to the best of the Issuer's knowledge, in definitive proxy or

information statements incorporated by reference in Part III of this Form 10-KSB

or any amendment to this Form 10-KSB.

[X]

The Issuer's

$14,258,000.



revenues



for



the fiscal year ended December 31, 1998, were



The aggregate market value of the voting and non-voting common stock held

by non-affiliates of the Issuer, computed by reference to the closing sale price

of such common stock on the Nasdaq National Market as of February 1, 1999 was

$25,024,339.

The

December



Issuer had 114,370,836 common shares of common stock outstanding as of

31, 1998.









================================================================================

1998 ANNUAL REPORT (SEC FORM 10-KSB)

INDEX

Securities and Exchange Commission

Item Number and Description













PART I

Item 1



Business



1



Item 2

Item 3

Item 4



Properties

Legal Proceedings

Submission of Matters to a Vote of Security Holders



8

22

23



PART II

Item 5



Market for the Company's Common Stock and Related

Stockholder Matters

Management's Discussion and Analysis or Plan of Operation

Consolidated Financial Statements and Unaudited

Supplemental Information

Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure



Item 6

Item 7

Item 8



23

25

41

72



PART III

Item 9



Item 12



Directors, Executive Officers, Promoters and Control

Persons of the Issuer; Compliance With

Section 16(a) of the Exchange Act

Executive Compensation

Security Ownership of Certain Beneficial Owners and

Management

Certain Relationships and Related Transactions



PART IV



AND SIGNATURES AND EXHIBIT INDEX



Item 13



Exhibits and Reports on Form 8-KSB

Signatures

Exhibit Index



Item 10

Item 11



72

73

73

74



75

76

77







PART I

ITEM



1.



CORPORATE



BUSINESS

STRUCTURE



Abacan Resource Corporation ("Abacan") is a limited company subsisting

under the Business Corporations Act (Alberta) that was created on February 10,

1995 following an amalgamation of five junior Canadian oil and gas companies

each of which, prior to the amalgamation, held certain rights to receive

production revenues and certain obligations to pay capital and operating costs

(collectively referred to as "Participating Interests") in the same oil and gas

concession properties located in the Federal Republic of Nigeria ("Nigeria").

Abacan currently has 14 wholly owned subsidiaries. These subsidiaries either

hold or, prior to the recent and ongoing restructuring of its affairs, held

certain rights to receive petroleum production revenues and certain obligations

to pay for exploration, development and operating costs (hereafter collectively

referred to as "Participating Interests") in Nigeria and the neighboring

Republic of Benin ("Benin"). See "Properties".

At the end of the most recently completed fiscal year, neither Abacan nor

any of its subsidiaries (collectively referred to hereafter as the "Company")

were subject to any bankruptcy or similar proceedings. However, the Company

does have outstanding debt obligations to secured and unsecured creditors and

may be in default of certain security agreements. In 1998, the Company

initiated a restructuring of its oil and gas operations and financial affairs

through: (1) the disposition of a number of its oil and gas properties and

related production facilities; (2) the reduction of operating, general and

administrative expenses; and (3) the reduction of a portion of the Company's

secured and unsecured debt. This restructuring is ongoing and in the future may

include the sale, farmout or other disposition of some or all of its oil and gas

properties. The Company currently has a significant working capital deficiency,

no appreciable revenues or cash flow and limited cash reserves. Therefore, the



Company believes that it must successfully attract new equity, debt, joint

venture partners, buyers, merger partners or a combination thereof in order to

remain viable and continue operations. See "History and Development of the

Business - Restructuring of Operations and Financial Affairs", "Management's

Discussion and Analysis of Financial Condition and Results of Operations - Risks

and Uncertainties - Liquidity" and "- Risks and Uncertainties - Financing

Risks".

HISTORY



AND



DEVELOPMENT



OF



THE



BUSINESS



General

- ------The Company's current business relates primarily to the exploration of oil

and gas properties located in West Africa. To date, the Company's operations

have included the acquisition of Participating Interests in concession blocks

located in both Nigeria and Benin and the exploration, development and

production of oil and condensate from concession blocks located in Nigeria. In

the case of Nigeria, the Participating Interests of the Company relate to oil

prospecting licences ("OPL") and oil mining leases ("OML") granted to several

different Nigerian companies with whom the Company has a number of separate

joint venture agreements. In Benin, the Participating Interests of the Company

are held pursuant to production sharing contracts ("PSC") granted by the Benin

Government.

-1

Prior to a reorganization of its oil and gas operations in June 1998, the

Company's operations were focused in two distinct geological regions - the Niger

Delta, Nigeria's prolific oil producing region located in south-central Nigeria,

and the Benin Basin, a largely unexplored area located in the coastal waters of

western Nigeria and Benin. Recently, the Company has focused its efforts on its

large Benin Basin holdings where negotiations are currently underway for the

establishment in Benin of a natural gas powered electrical generation plant that

is expected to utilize the natural gas resources identified in the Company's

Benin Basin concessions. The Company is also actively marketing the farm-out,

sale or other disposition of its properties to industry partners which is

expected will provide the financial resources necessary to explore and develop

the Company's prospects in the region. The Company has not undertaken research

and development activities during the past two fiscal years.

Acquisition, Exploration and Development of West African Oil and Gas Properties

- -------------------------------------------------------------------------------In December 1992, the Company acquired a Participating Interest in an

on-shore concession block located in Benin from Wade Cherwayko, a former

director and executive officer of the Company who, until that time had been

involved in his personal capacity in identifying opportunities to acquire

unallocated oil and gas concession properties in West Africa. Prior to

acquiring this Participating Interest, the Company had been involved in oil and

gas exploration activities in western Canada and the western United States but

had not earned any ownership interests in respect thereof. Following the

purchase of the Participating Interest in Benin from Mr. Cherwayko for common

stock, the Company initiated a program of additional acquisition and exploration

of petroleum properties in Nigeria and other countries in West Africa.

In June 1993, the Company acquired Participating Interests in Benin Basin

Concession Block OML 113 (formerly OPL 309) from Yinka Folawiyo Petroleum

Company Limited ("YFP") and Concession Block OPL 302 from another Nigerian

company. YFP is a company that is substantially owned by the father of Mr.

Tunde Folawiyo, a director of the Company. In August 1993, the Company acquired

a Participating Interest in offshore Concession Block OML 112 (formerly OPL

469). The Company then undertook an aggressive campaign to expand its

concession acreage in West Africa through the addition of Participating

Interests in Niger Delta Concession Blocks OPL 237 (located adjacent to OML 112)



and OPL 233, Benin Basin Concession Block OPL 310 in Nigeria and Benin Basin

Block 4 and Block 1 in Benin. See "- The Petroleum Industry in Nigeria and

Benin", AProperties" and "Certain Relationships and Related Transactions".

In February 1995, in order to consolidate its Participating Interests in

Concession Blocks OML 112, OML 113 and OPL 302, the Company amalgamated with

four other Canadian junior oil and gas companies, each of which at the time of

the amalgamation held Participating Interests in Blocks OML 112, OML 113 and OPL

302. The amalgamation resulted in the acquisition of the Participating

Interests of the amalgamating junior oil and gas companies by the Company.

Throughout 1994 and 1995, the Company conducted 2-D and 3-D seismic

programs on Blocks OML 112 and OPL 237 and a 2-D seismic program on Blocks OML

113 and OPL 310. The Company's first off-shore exploration well was

successfully drilled on the Ima Field on Block OML 112 in September 1994.

Between September 1994 and January 1997, the Company successfully drilled six

additional wells on the Ima Field and completed the construction and

installation of a mobile off-shore production facility capable of producing up

to 50,000 barrels of oil and condensate per day. Commercial production of crude

oil and condensate commenced from the Ima Field in January 1997. Production

levels from the Ima Field peaked at approximately 27,500 gross (13,400 net)

barrels of oil and condensate per day from six producing wells. In June 1996,

the Company signed a Crude Oil Sale Agreement pursuant to which a large

international crude oil marketing company agreed to market and sell the crude

production from the Ima Field. A total of 6.1 million gross (2.9 million net)

barrels of crude oil were produced and sold during the fiscal period ended

December 31, 1997. In fiscal 1998 prior to the disposition of the Company's

interest in June 1998, a total of 2.64 million gross (1.45 million net) barrels

of crude oil were produced and sold from the Ima Field.

-2

The Company drilled its first well in the Benin Basin on on-shore Block OPL

302 in December 1993. The well was not successful and the Company's

Participating Interest in the concession was allowed to expire in 1997. Between

November 1996 and March 1997, the Company successfully drilled two off-shore

wells on the Aje Field on Benin Basin Concession Block OML 113. The wells

tested maximum flow rates of 8,800 and 5,500 barrels of oil per day respectively

along with significant volumes of natural gas. Both wells have been shut-in

following testing pending the financing and construction of a suitable off-shore

production facility. See "Properties - Benin Basin - Drilling, Development and

Future Work Commitments".

Restructuring of Operations and Financial Affairs

- -----------------------------------------------------In June 1997 production rates from the Ima Field began to decline. It was

subsequently determined that the decline in production was attributable to

compartmentalization of the main producing zones and the absence of a strong

water drive for the Ima Field. In February 1998, Abacan appointed a new

President and Chief Executive Officer. A comprehensive reservoir analysis of

the Ima Field completed in the spring of 1998 suggested that the Ima Field was

no longer economically producible. The Company immediately initiated a

restructuring strategy in respect of its oil and gas operations and financial

affairs which both management and the Board of Directors considered essential to

maintain the financial viability of the Company. The Company's restructuring

strategy, which is ongoing, was comprised of a series of steps which included:

(1) the disposition of the Company's Participating Interests in the Ima Field;

(2) the sale or disposition of the Company's mobile offshore production unit

("MOPU") which was then being utilized on the Ima Field; (3) the reduction and

extension of the repayment terms of the Company's secured debt; (4) the

settlement of claims of trade and other unsecured creditors; (5) the reduction

of general and administrative expenses; and (6) the maximization of exploitation

opportunities with joint venture partners for the exploration and development of

the Company's large acreage position in the Benin Basin.



On June 30, 1998, the Company concluded the first two phases of its overall

restructuring strategy. Under the terms of a settlement agreement (the "Amni

Settlement Agreement") reached with its Nigerian partner, Amni International

Petroleum Development Company Limited ("Amni"), the Company relinquished all

rights and Participating Interests to the "shallow" zones of the Ima Field. At

the time of disposition, the "shallow" zones comprised all of the Company's

proved developed reserves in the Niger Delta and all of its petroleum

production. In exchange, Amni agreed: (1) to assume all outstanding unsecured

financial claims against the Company (including trade claims) related to the

development of the Ima Field; (2) to assume responsibility for ongoing and

future lease obligations with existing service providers to the Ima Field; (3)

to release the Company from certain financial obligations due or accruing under

the terms of the joint venture agreements between the Company and Amni valued at

approximately $20 million; and (4) to release the Company from any claims Amni

had to the MOPU. The Company retained a 10% Participating Interest in the "Deep

Ima Prospect" which is located below the producing shallow zones of the Ima

Field and which prospect was previously identified in 1997 by one of the

Company's exploration wells.

-3

Concurrent with concluding the terms of the Amni Settlement Agreement, the

Company conveyed its interest in the MOPU to a major international service

company in exchange for the extinguishment of approximately $18.8 million of

debt, representing all of the debt due from the Company to the international

service company. In connection with this settlement, the Company also

restructured an existing secured loan (the "Secured Loan"). The Secured Loan had

been previously advanced to the Company in August 1997 with the proceeds

therefrom being utilized to repay project financing used for the construction of

the MOPU and a portion of the exploration and development costs associated with

the Ima Field. The restructuring of the Secured Loan by the lender (the

"Secured Lender") enabled the Company to defer quarterly interest payments until

December 31, 1998 and to extend the maturity of approximately $20.1 million of

the loan until June 30, 1999, with the remainder of $10.6 million due on

December 31, 1999. The terms of its agreement with the major international

service company, provided that if a future sale price of the MOPU is above a

pre-determined threshold, a portion of the proceeds of sale will be applied to

reduce the Company's obligations under its existing Secured Loan.

Subsequent to December 31, 1998, the Company received confirmation from the

Secured Lender that the interest payment due December 31, 1998 had been

capitalized and that the first payment was amended to March 31, 1999. The

Secured Lender has since advised the Company that notwithstanding its written

extension, payment of the first interest instalment was due on December 31,

1998. The Company has not yet made this interest payment and is currently

negotiating with its Secured Lender regarding further relief from this and other

near-term cash interest payments. There is no assurance that such negotiations

will be successful. See "Management's Discussion and Analysis of Financial

Condition and Results of Operations - Risks and Uncertainties - Financing

Risks".

In July 1997, the Company increased its participating position in Benin

Block 4 and Block 1 to a 100% Participating Interest. This acquisition was

followed in June 1998 with the execution of a Letter of Intent with a major

international natural gas and electrical power generating company and the

Government of Benin for the development, construction, financing and operation

of a natural gas powered electrical generation power plant to be located in

Cotonou, Benin. Negotiations are ongoing to finalize the details of a power

plant that is expected to provide electrical energy to Benin and the

neighbouring countries of Togo and Ghana. Natural gas feedstock is expected to

be supplied from the Company's Benin Block 1 in Benin and the Aje Field in

Nigerian Block OML 113. The Company has drilled and tested significant gas

resources on the Aje Field that are awaiting development of a suitable market

before being classified as proved reserves. The Company believes that it will



require an industry partner to fund the costs of developing a natural gas market

and to fund the costs of developing the natural gas resources contained in the

Aje Field. See "Management's Discussion and Analysis of Financial Condition and

Results of Operations - Risks and Uncertainties - Liquidity".

THE



PETROLEUM



INDUSTRY



IN



NIGERIA



AND



BENIN



All of the Company's oil and gas properties are located in Nigeria and

Benin, both of which are developing third world nations that have experienced

periods of civil unrest and political and economic instability. The regulation

of the petroleum industry has been and is expected to continue to be affected by

economic and political events that occur in each country. Such events are

beyond the control of the Company and may adversely affect the future operations

of the Company.

Nigeria

- ------Overview

Oil has been produced in Nigeria by multinational companies since 1958 with

only limited interruptions despite periods of civil and political unrest. The

oil industry constitutes the most important segment of the Nigerian economy and

accounts for approximately 90% of the country's total exports and approximately

75% of total government revenue.

-4

The Company currently operates in Nigeria in conjunction with a number of

Nigerian companies (the "Nigerian Partners") under a program (the "Indigenous

Program") introduced in 1990 by the Nigerian Ministry of Petroleum Resources

(the "MPR") in an effort to increase production and domestic participation in

the country's oil industry. The Indigenous Program provides qualified,

privately owned Nigerian companies with both preferential treatment in the

allocation of available petroleum concession blocks and favourable economic

terms for the development of such blocks. Participating Nigerian companies are

permitted to establish revenue and cost sharing arrangements with foreign

companies that provide the technical expertise, operational support and

financial resources required for the exploration and development of the

concession blocks. In the case of the Company, such arrangements have been

established by way of joint venture agreements between the Company and its

various Nigerian Partners. As part of the Indigenous Program, the Nigerian

government receives a combination of production royalties and taxes and is not

required to fund any exploration or development costs. The Nigerian National

Petroleum Company is not involved in concession blocks awarded under the

Indigenous Program. See "Management's Discussion and Analysis of Financial

Condition and Results of Operations - Risks and Uncertainties - Nigerian

Regulation - Dependence Upon the Indigenous Program".

Regulation

All phases of oil exploration, development and production are regulated by

the Nigerian government either directly, through the MPR or through the Nigerian

Department of Petroleum Resources ("DPR") pursuant to the Petroleum Decree,

1969, under periodic policy statements issued by the Nigerian government and

through administrative practices of the DPR. Areas of government regulation

include restrictions on petroleum production, price controls, export controls,

taxes and royalties, expropriation of property, environmental protection and rig

safety. In addition, all petroleum drilling and production in Nigeria must be

approved in advance by the Nigerian government through the MPR or the DPR. In

the case of the Company, any future operations to be conducted on its Nigerian

concessions, including the establishment of a production facility on Block OML

113 and the export of natural gas to Benin will require MPR or DPR approval.

See "Management's Discussion and Analysis of Financial Condition and Results of

Operations - Risks and Uncertainties - Nigerian Regulation".



Under current Nigerian legislation, a petroleum concession is required for

a party to conduct petroleum exploration and development. Concessions may be

obtained directly from the MPR or from an existing concession owner, provided

that prior MPR approval to an assignment is obtained. Petroleum concessions

granted by the MPR consist of either an oil exploration license, an oil

prospecting licence ("OPL") or an oil mining lease ("OML"). Concession Blocks

are typically designated on the basis of whether they are subject to an OPL or

OML. An OPL gives the holder the exclusive right to conduct both seismic and

exploratory drilling operations within a concession block and the right to carry

away and dispose of petroleum produced during the term of the OPL. An OML is

issuable to the holder of an OPL following testing or production of a minimum of

10,000 barrels per day and the fulfilment of a number of other conditions and

requirements established by the MPR and DPR.

An OML provides the holder with an exclusive right to conduct exploration

and development drilling operations and to export petroleum produced on the

concession block for a term of up to 20 years. An OML may be renewed upon

application to the MPR. The Petroleum Decree, 1969 contains provisions that

require the holder of an OML to relinquish 50% of the geographic area

encompassed by the OML after 10 years upon the request of the MPR. The acreage

to be relinquished is identified by the holder of the OML and not the MPR. The

Nigerian government may also elect, during the currency of an OML or OPL to

directly participate in the concession, which could result in a reduction of the

Participating Interest of the Company. The Petroleum Decree, 1969 does not

specify the maximum level of government participation. See " Management's

Discussion and Analysis of Financial Condition and Results of Operations - Risks

and Uncertainties - Nigerian Regulation - Government Right of Participation".

-5

The Company's current Participating Interests in Nigeria exist pursuant to

the terms of joint venture agreements between the Company and its Nigerian

Partners. In the case of Concession Block OML 113, an OML was issued to YFP for

this block on July 3, 1998. The OPL for Concession Block OPL 310 has expired,

however, at the request of the Company's Nigerian Partner, the DPR confirmed in

February 1997 that the OPL was in good standing. Nothing has been received by

the Company or to the Company's knowledge, by its Nigerian Partner that would

indicate that either the MPR or DPR consider OPL 310 not to be valid or in good

standing at the current time. See "Properties - Benin Basin" and "Management's

Discussion and Analysis of Financial Condition and Results of Operations - Risks

and Uncertainties - Nigerian Regulation - Assignment of Interests Under Joint

Venture Agreements" and "Risks and Uncertainties - Nigerian Title Issues".

Revenues generated from petroleum operations are subject to a number of

tax/royalty regimes. Under the Indigenous Program, the fiscal regime consists

of a production royalty and an adjusted profits tax. The payment of the royalty

to the Nigerian Government is dependant upon the levels of petroleum production

and is determined on the basis of the chargeable value of the crude oil produced

less an allowance for oil used in the extraction process. Royalty rates vary

depending upon whether the concession is on-shore or off-shore and, in the case

of off-shore concession, the average water depth of the concession. A royalty

of 20% is applicable to on-shore concessions reducing to no royalty for

concessions situated in over 1000 metres of water. The royalty applicable to

the Company's Nigerian concessions OML 113 and OPL 310 have not yet been

formalized but are expected to be not greater than 15%.

In addition to the royalty, producers are subject to a tax on adjusted

petroleum profits. Adjusted petroleum profits consist generally of revenues

from petroleum sales less operational expenses and certain capital costs

(including drilling costs). The Petroleum Profits Tax Act, 1969, prescribes a

petroleum profits tax rate of 85%. The Company understands that a reduced

petroleum profits tax rate may be applicable to concession blocks awarded under

the Indigenous Program. Any changes to the current royalty regime or the

Petroleum Profits Tax Act, 1969 or their applicability to the Indigenous Program



will affect the Company. See "Management's Discussion and Analysis of Financial

Condition and Results of Operations - Risks and Uncertainties - Nigerian

Regulation - Uncertainty Regarding Tax and Royalty Arrangements".

Benin

- ----The Benin petroleum industry is less developed than the Nigerian petroleum

industry. Petroleum exploration started in Benin in 1964 and has been focused

primarily in the off-shore area of the Benin Basin. The country's first major

discovery occurred in 1982 with the discovery of the Seme Field located

off-shore near the Nigerian border. There has been a number of significant

off-shore discoveries made recently on the Nigerian side of the Benin Basin

(including the Company's discovery on OML 113) which has heightened interest in

Benin's petroleum sector in recent years.

Regulation

Responsibility for the regulation and control of the petroleum industry in

Benin rests with the national government pursuant to the Petroleum Code of the

Republic of Benin and the administrative decrees and ordinances established

thereunder (collectively, the "Benin Petroleum Code"). Regulation of

exploration, exploitation, title, transportation, marketing and taxation of

petroleum rests with the Ministry of Energy, Mines and Hydraulics (the "Benin

Oil Ministry"). All drilling and production and other petroleum operations in

Benin require prior approval of the Benin Oil Ministry. Consequently, any

future operations to be conducted on its Benin concessions, including the

drilling of exploration wells on Block 1 and Block 4, will require the prior

approval of the Benin Oil Ministry.

-6

The Company's current Participating Interests in Benin exist pursuant to

separate Production Sharing Contracts for Block 1 and Block 4 between the

Company and the Government of Benin. Each of the PSC's establish a minimum work

commitment that must be met by the Company. In the case of Block 1, the minimum

work commitment includes the drilling of one well and the completion of a

seismic program by the end of February 1999. The requisite work commitments for

Block 1 were not satisfied by the February 1999 deadline. The Company is

currently negotiating an extension with the Benin Oil Ministry and risks the

loss of its Participating Interest in Block 1 should an extension not be

secured. In the case of Block 4, the minimum work commitment includes and the

completion of a seismic program which has been satisfied, and the drilling of

one exploratory well by the end of February 2002. The Company believes that it

will require an industry partner to fund the requisite minimum work commitments

associated with Blocks 1 and 4. See "Management's Discussion and Analysis of

Financial Condition and Results of Operations - Risks and Uncertainties Liquidity" and A - Risks and Uncertainties - Benin Title Issues".

COMPETITIVE



AND



INDUSTRY



CONDITIONS



The oil and gas industry is intensely competitive and the Company will

continue to compete with a substantial number of other companies, many of whom

have greater technical, financial and other resources. Many such companies not

only explore for and produce crude oil and natural gas, but also carry on

refining operations and market oil, natural gas and other products on a

worldwide basis.

The Company does not currently own production facilities or refining

operations and will rely upon other parties to produce, market and refine any

future petroleum production. Due to the changes in the affairs of the Company

arising out of its recent restructuring, the Company will have to secure

adequate sources of funding to retain the services of such parties. In the case

of the Benin Basin Concessions, there is currently no market for the Company's

natural gas resources. Subject to completion, the establishment of a natural



gas electrical generation project currently being negotiated is expected to

create a market. The electrical generation project has not yet been formally

approved, financed or constructed. There is no assurance that the project will

be approved, or if approved, that it will be successfully completed. If

completed, the project will rely upon an electrical distribution network that is

owned by the governments of Benin, Togo and Ghana as well as other third

parties. If a sustainable market for the Company's natural gas is created, the

Company will have to finance and construct or rely on other parties to finance

and construct a suitable production facility and natural gas pipeline to the

natural gas electrical generation project. There are currently other sources of

electricity which may affect the amounts that can be generated and sold which in

turn will affect demand for the Company's natural gas resources. See

"Management's Discussion and Analysis of Financial Condition and Results of

Operations - Risks and Uncertainties - Benin Regulation".

ENVIRONMENTAL



PROTECTION



The Company's operations are and will continue to be affected in varying

degrees by legislation intended to ensure the protection of the environment.

Much of Nigeria's and Benin's environmental legislation is administered by the

DPR and the Benin Oil Ministry, respectively. These government departments may

require environmental impact assessments prior to granting approval for certain

larger scale or environmentally sensitive activities or may impose restrictions

or prohibitions on releases or emissions of various substances generated by the

Company's oil and gas operations or any future electrical generation project.

Compliance with such legislation or administrative requirements may require

significant expenditures and the breach of such requirements may result in the

imposition of material fines and penalties. Guidelines and regulations continue

to be developed and implemented by the DPR, Benin Oil Ministry and other

government ministries in areas of waste management, contaminated sites,

environmental impact assessments and habitat protection.

-7

The Company believes that its Nigerian and Benin operations have at all

times complied in all material respects with applicable Nigerian and Benin

legislation and administrative requirements relating to safety and environmental

protection. The costs of such compliance has been included as either capital

expenditures or operating costs. The Company intends to continue conducting its

operations in both Nigeria and Benin in a manner that complies with

environmental standards imposed by the DPR and the Benin Oil Ministry and all

applicable legislation.

EMPLOYEES

At December 31, 1998, the Company had 7 employees and consultants in

Houston, 3 consultants in Calgary and 22 employees and consultants in London,

Benin and Nigeria. None of the Company's employees or consultants are party to

a collective bargaining agreement.

ITEM



2.



PROPERTIES



OVERVIEW

Between 1993 and 1997, the Company acquired Participating Interests in

eight oil and gas concession blocks in the Benin Basin and Niger Delta. In the

case of its Nigerian concession blocks, the Participating Interests of the

Company are held pursuant to joint venture agreements with the Company's

indigenous Nigerian Partners who in turn have been issued oil prospecting

licences or oil mining leases from the MPR. In the case of its two concession

blocks located in Benin, the Participating Interests of the Company are held

pursuant to two separate production sharing contracts directly between the

Company and the national Government of Benin. Participating Interests in two of

the Company's Nigerian concession blocks have been subsequently surrendered or

released by the Company. Consequently, at the end of the most recently



completed financial year, the Company held Participating Interests in six

concession blocks, two of which were located in the Niger Delta and four of

which were located in the Benin Basin. See "Niger Delta - Cost Obligations and

Revenue Interests" and "Benin Basin - Cost Obligations and Revenue Interests".

NIGER



DELTA



Recent



Events



Prior to June 1998, all of the Company's proven reserves and all of its

production came from the Ima Field located in Niger Delta Concession Blocks OML

112 and OPL 237. In June 1998, following an assessment that the shallow

producing zones of the Ima Field were no longer economic, the Company began to

restructure its oil and gas operations and in so doing, relinquished

substantially all of its Participating Interest in Nigerian Blocks OML 112 and

OPL 237. The only interest retained in the blocks by the Company is a 10%

Participating Interest in the Deep Ima Prospect located beneath the existing

producing zones of the Ima Field. There are no reserves allocated to the Deep

Ima Prospect. In January 1998, the Company cancelled its joint venture

agreement in respect of Concession Block OPL 233.

As a consequence of this ongoing restructuring, at the end of the most

recently completed financial year, the Company has no Participating Interests or

production from the Niger Delta with the exception of a 10% working interest in

the Deep Ima Prospect. PERSONS READING THIS DOCUMENT SHOULD NOTE THAT THE

PARTICIPATING INTERESTS ATTRIBUTABLE TO THE COMPANY IN THE NIGER DELTA AND

DISCUSSED IN THIS SECTION WERE DISPOSED OF AND THAT WITH THE EXCEPTION OF THE

INTEREST HELD IN THE DEEP IMA PROSPECT, ARE NO LONGER HELD BY THE COMPANY. See

"Business - History and Development of the Business - Restructuring of

Operations and Financial Affairs".

-8

Location

Prior to the disposition of its Participating Interests on June 30, 1998,

the Company held Participating Interests in adjoining Niger Delta Concession

Blocks OML 112 and OPL 237. Concession Blocks OML 112 and OPL 237 are located

approximately six miles off the coast of south-central Nigeria, cover an area of

approximately 150,000 acres, and are in the vicinity of a number of Nigeria's

largest oil producing fields, including Mobil's Oso and Kpono Fields; Shell's

Bonny, Opobo and Kalaekule Fields; and Elf Aquitaine's Ameram Field.

Prior to the cancellation of its joint venture agreement in early January

1998, the Company also held a Participating Interest in Niger Delta Concession

Block OPL 233. Concession Block OPL 233 covers an area of approximately 30,000

acres and is located along the Nigerian coastline 100 miles northwest of

Concession Blocks OML 112 and OPL 237 in the vicinity of Texaco's producing

Middleton, North Apoi and Pennington Fields.

Participating



Interests



An oil prospecting licence for Concession Block OPL 237 was granted by the

MPR to Amni in December 1994. An OML for Concession Block OML 112 (formerly

Concession Block OPL 469) was issued to Amni in February 1998 following a prior

grant of an OPL for the concession block in August 1993. The Company acquired

its Participating Interests in Concession Blocks OML 112 and OPL 237 pursuant to

joint venture agreements signed with Amni in August 1993 and December 1994

respectively. On June 30, 1998, the existing joint venture agreements for

Blocks OML 112 and OPL 237 were terminated with the consent of Amni and replaced

by a new joint venture agreement (the "June 1998 JVA") which granted a 10%

Participating Interest to the Company restricted to the Deep Ima Prospect.

An OPL for

Products Company



Concession Block OPL 233 was granted by the MPR to Petroleum

Limited ("PPCL") in August 1993. The Company acquired a



Participating Interest in Concession Block OPL 233 through a joint venture

agreement with PPCL signed in November 1996. The joint venture agreement was

terminated by mutual consent of the Company and PPCL in January 1998 with no

work having been performed by the Company on the block.

Drilling,



Development



and



Production



Prior to the disposition of its Participating Interests in the Niger Delta,

the Company had drilled 10 exploratory and development wells in the region. The

following table provides a summary of the wells drilled and completed by the

Company in the Niger Delta:

-9





TOTAL VERTICAL DEPTH

CONCESSION BLOCK WELL NAME DATE COMPLETED

(FEET)

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







OML 112

NGO #3

September 1994

11,400

OML 112

NGO #4

November 1994

11,400

OML 112

NGO #5

March 1995

11,450

OPL 237

Ima #1

May 1995

11,600

OPL 237

Ima #2

November 1995

11,400

OPL 237

Ima #6

June 1997

12,350

OPL 237

Ima #7

August 1997

10,735

OML 112

Ima #8

October 1997

11,380

OML 112

Ima #9

February 1998

12,940

OPL 237

Ima #10

April 1998

10,765

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


The Company commenced commercial production of oil and condensate from the

Ima Field in January 1997. During the most recently completed fiscal year, a

total of approximately 2.64 million gross (1.45 million net) barrels were

produced from the Ima Field prior to the disposition of the Company's

Participating Interest in June 1998. Production levels from the Ima Field for

1998 prior to the disposition averaged approximately 14,600 gross (8,050 net)

barrels of oil per day.

The following table sets forth the average sales price (including

transfers) and the average production cost per barrel of oil produced since the

commencement of production in January 1997 to the disposition of the Company's

Participating Interest in the Ima Field on June 30, 1998.





Year Ended

----------------------------------------December 31, 1997

December 31, 1998(1)

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



$

17.56 $

12.22

$

13.61 $

14.94





Average Sales Price per Barrel

Average Production Cost per Barrel



- ---------------------------------(1)

Reflects production to June





30,



1998



Oil and condensate produced from the Ima Field was lifted and sold pursuant

to a Crude Oil Sale Agreement signed in August 1996 (amended July 1997) between

the Company, Amni and a large international crude oil marketing company. The

sale price under the Crude Oil Sale Agreement was linked to world markets prices

for crude oil and was payable in U.S. dollars outside of Nigeria through a bank



in Europe. As part

terminated effective

Cost



Obligations



and



of the restructuring, the Crude Oil Sale Agreement was

June 30, 1998. See "- Marketing and Sale of Petroleum".

Revenue



Interests



The Company's Participating Interests in Concession Blocks OML 112 and OPL

237, (both before and after the disposition of its Participating Interest in the

shallow zones of the Ima Field) are held by subsidiaries and consist of an

obligation to pay for exploration and development costs ("Cost Obligation") and

an entitlement to receive revenues from the sale of production ("Revenue

Interest"). Prior to the signing of the June 1998 JVA with Amni, the Cost

Obligation and Revenue Interest of the Company varied depending upon whether

Payout has been reached on the applicable concession block. The June 1998 JVA

establishes the same Cost Obligation and Revenue Interest both before and after

Payout.

-10

A summary of the Company's Cost Obligation and Revenue Interest in its

Niger Delta concessions both before and after the disposition of its

Participating Interests in June 1998 is outlined in the tables below. In all

cases, the Revenue Interest is after giving effect to gross overriding royalties

(or their equivalent) payable to third parties. Royalties are payable on Blocks

OML 112 and OPL 237 to a company controlled by Wade Cherwayko, a former senior

executive officer and director of the Company. A royalty is also payable on all

of the Niger Delta concessions to YFP, a company substantially controlled by the

father of Tunde Folawiyo, a current director of the Company. See "Certain

Relationships and Related Transactions".

Prior



to



June



30,



1998







BEFORE PAYOUT

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



AFTER PAYOUT

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



-----------CONCESSION

COUNTRY REVENUE INTEREST

COST OBLIGATION

REVENUE INTEREST

COST

OBLIGATION

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











Block OML 112

Nigeria

49.7%(2)

100.0%

25.3%(2)

40.0%

Block OPL 237

Nigeria

48.7%(2)

100.0%

24.8%(2)

40.0%

Block OPL 233(1) Nigeria

48.5%(3)

100.0%

24.1%(3)

40.0%



Subsequent



to



June



30,



1998







BEFORE PAYOUT

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



AFTER PAYOUT

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



-----------CONCESSION

COUNTRY REVENUE INTEREST

COST OBLIGATION

REVENUE INTEREST

COST

OBLIGATION

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











Block OML 112(4) Nigeria

10.0%(5)

10.0%

10.0%(5)

10.0%

Block OPL 237(4) Nigeria

10.0%(5)

10.0%

10.0%(5)

10.0%





- ---------------------------------(1)

Reflects Cost Obligation and Revenue Interest to January 30, 1998 at which

time the Joint

Venture Agreement between the Company and PPCL was terminated by mutual consent.

No work was

performed or expenditures incurred by the Company on Concession Block OPL

233.

(2)

Revenue Interest gives effect to (i) the interest of the Company's Nigerian

Partner, (ii)

combined government royalties and taxes of 30% both before and after Payout and (iii)

a number of

gross overriding royalties that vary from concession to concession and range between

approximately

6.4% and 5.3% before Payout and 3.2% and 2.6% after Payout. A portion of the

total gross

overriding royalties are held by a company controlled by Wade Cherwayko, a former

senior executive

officer and director of the Company and by YFP, a company substantially controlled by

the father of

Tunde Folawiyo, a director of the Company. Tunde Folawiyo is also an executive

officer of YFP.

(3)

The Revenue Interest shown gives effect to the Company's proportionate

share of (i)

combined government royalties and taxes of 30% both before and after payout and (ii)

a number of

gross overriding royalties equal to approximately 6.5% before Payout and 3.9%

after Payout. A

portion of the total gross overriding royalties is payable to YFP.

(4)

The joint venture agreements governing the Company's participation in its

Niger Delta

concessions reserve to the Nigerian government the right to acquire a Participating

Interest in

each of the respective concession blocks. If the Nigerian government elects to

participate, the

Company's after-Payout Revenue Interest could be reduced to approximately 8.0% after

accounting for

the interests of others. In such an event, there would be a corresponding

reduction in the

Company's after-Payout Cost Obligation. See "Management's Discussion and Analysis

of Financial

Condition and Results of Operations - Risks and Uncertainties - Nigerian Regulation

- Government

Right of Participation".

(5)

Excludes applicable gross overriding royalties or their equivalent

payable to others

(including YFP and a company controlled by Wade Cherwayko). The level of the

royalties is

currently under review by the Company as a result of the signing of the June 1998

JVA and the

Company anticipates re-negotiating the levels of royalties held by royaltyholders prior to

commencing any further operations on the Deep Ima Prospect.



BENIN



BASIN



Location

The Benin Basin is a large geological region located along the western

coastal region of Nigeria and much of offshore Benin. In Nigeria, the Company's

Benin Basin concessions consist of adjoining offshore Concession Blocks OML 113

and OPL 310. In Benin, the Company's Benin Basin concessions consist of

offshore Concession Block 1 and Block 4, located adjacent to Nigerian Concession

Block OML 113. Concession Block 1 encompasses the area around and below the



producing zones of the Seme Field. Concession Block 4, located further offshore

than Concession Block 1 spans from the Nigerian border on the east to the Togo

border on the west.

-11

Participating



Interests



In Nigeria, an OML for Concession Block OML 113 (formerly OPL 309) was

issued to YFP in July 1998 following the prior grant of an OPL for the

concession block in June 1991. YFP is a company that is substantially

controlled by the father of Tunde Folawiyo, a director of the Company. Tunde

Folawiyo is also an executive officer of YFP. An OPL for Concession Block OPL

310 was granted to Optimum Petroleum Development Limited ("Optimum") by the MPR

in February 1992. The Company acquired its Participating Interest in Concession

Block OML 113 in June 1993 pursuant to a joint venture agreement with YFP and in

Concession Block OPL 310 in December 1996 pursuant to a joint venture agreement

with Optimum. The OPL for Block OPL 310 expired in February 1997 however, at

the request of Optimum, the DPR confirmed in February 1997 (subsequent to the

expiry date) that the OPL continued to be in good standing notwithstanding the

expiry of its formal term. Nothing has been received by the Company or, to the

knowledge of the Company, by Optimum subsequent to February 1997 that would

indicate that the MPR or DPR consider OPL 310 not to be valid or in good

standing at the current time. To maintain its Participating Interest in

Concession Block OPL 310, the Company is required to satisfy certain future work

commitments. See "Management's Discussion and Analysis of Financial Condition

and Results of Operations - Risks and Uncertainties - Nigerian Title Issues Expiration or Cancellation of Nigerian Oil Prospecting Licences".

In Benin, the Company and Addax Petroleum Benin Limited ("Addax Benin")

executed a Production Sharing Contract in respect of Benin Block 1 (the "Block 1

PSC") and Benin Block 4 (the "Block 4 PSC") in February 1997. On September 30,

1997, the Company acquired all of Addax Benin's Participating Interest in the

Block 1 PSC and Block 4 PSC. To maintain its Participating Interest in Block 1

and Block 4, the Company is required to satisfy certain future work commitments.

See "Management's Discussion and Analysis of Financial Condition and Results of

Operations - Risks and Uncertainties - Benin Title Issues".

The Company has paid total acquisition fees of approximately $9.125 million

for its Participating Interests in the Benin Basin concessions. With the

conversion of OPL 309 into OML 113 in July 1998, an additional $5.0 million in

acquisition fees is payable to YFP out of a portion of the Company's share of

future production revenues. YFP is a company that is substantially controlled

by the father of Tunde Folawiyo, a director of the Company. Tunde Folawiyo is

also an executive officer of YFP. On Concession Block OPL 310, $1.0 million is

payable to Optimum within nine months following testing of the first exploration

well and $2.0 million following commencement of production.

Drilling,

on



Development



and



Future



Work



Commitments



The following table provides a summary of the wells drilled by the Company

its Benin Basin concessions since 1996:







CONCESSION

TOTAL VERTICAL DEPTH

BLOCK

WELL NAME DATE COMPLETED

(FEET)

FLOW RATE (BOPD)(1)

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









OML 113

AJE #1

November 1996

7,605

5,500

OML 113

AJE #2

March 1997

11,551

8,800



- ---------------------------------(1)

Flow rate results are from testing only and are not necessarily

indicative of flow rates that may be realized during production. Results shown



include oil and condensate but not natural gas. Testing and compilation of the

test results from the Company's wells was conducted by Schlumberger.



-12

The Company has fulfilled its minimum work obligations in respect of

Concession Block OML 113. However, significant additional expenditures will

have to be incurred by the Company under the terms of its joint venture

agreement with YFP in order to produce the petroleum resources identified in OML

113. Most notably, the Company will have to establish or secure a market for

the natural gas identified in the Aje Field of Block OML 113, secure a suitable

floating off-shore production facility and finance, construct or lease a

pipeline to an on-shore market. There is no assurance that the Company will,

by itself or with others, be able to establish a suitable market for the

petroleum resources contained in the Aje Field of Block OML 113 or that it will

be able to secure a production facility or construct a pipeline necessary to

produce such resources. See " - Cost Obligations and Revenue Interests" and

"Management's Discussion and Analysis of Financial Condition and Results of

Operations - Risks and Uncertainties - Liquidity".

On Concession Block OPL 310, the Company is required to complete a minimum

work program consisting of three wells and a seismic program. The obligation of

the Company to initiate expenditures towards the minimum work program commences

after receipt of applicable government approval for the joint venture agreement

between the Company and Optimum. The OPL for Concession Block OPL 310 has

expired and Optimum has not yet secured an extension or replacement OPL or the

requisite government approval for the joint venture agreement. Optimum has

advised the Company that it wishes the Company to proceed with fulfilling its

minimum work commitment in advance of receipt of requisite government approvals.

In Benin, the work commitments of the Company are set out in the Block 1

PSC and Block 4 PSC. In the case of Block 1, the Company is required to drill

one well and complete a seismic program by the end of February 1999. The

requisite work commitment for Block 1was not satisfied by this deadline. The

Company is currently negotiating an extension with the Benin Ministry and risks

the loss of its Participating Interest in Block 1 if an extension is not

secured. In the case of Block 4, the Company is required to drill one well and

complete a seismic program by February 2002. The Company has satisfied the

seismic commitment but not the drilling commitment. See "Management's

Discussion and Analysis of Financial Condition and Results of Operations - Risks

and Uncertainties - Benin Title Issues" and "- Risks and Uncertainties Liquidity".

In June 1998, the Company entered into a Letter of Intent with a subsidiary

of a major international natural gas producing and electrical power generating

company and the Government of Benin for the development, financing, construction

and operation of an electrical generation power plant to be located in Cotonou,

Benin. Under the terms of the Letter of Intent, natural gas feedstock for the

project is expected to be supplied from the Company's Aje Field natural gas

resources identified on Nigerian Block OML 113 and from Block 1 in Benin.

Negotiations are continuing towards the signing of a definitive Power Purchase

Agreement. See "Management's Discussion and Analysis of Financial Condition and

Results of Operations - Risks and Uncertainties - Benin Regulation".

Cost



Obligations



and



Revenue



Interests



The Company's Participating Interests in the Benin Basin, consisting of a

Cost Obligation and Revenue Interest, are held by the Company pursuant to joint

venture agreements with its Nigerian Partners in Nigeria and pursuant to the

Block 1 PSC and Block 4 PSC in Benin. The Cost Obligation and Revenue Interest

of the Company vary based upon whether Payout has been reached on the applicable

concession block.

-13-





The joint venture agreements with the Nigerian Partners generally provide

that, as part of its Cost Obligation, the Company must fund all exploration and

development costs before Payout and 40% of all such costs after Payout.

Provided there is production from a concession block, the Company is entitled to

55% of revenues before Payout and 28% after Payout (before accounting for gross

overriding royalties or their equivalent payable to others). The balance of

revenues before Payout is payable as to 30% to the Nigerian government for taxes

and royalties and as to 15% to the Nigerian Partner. There is a pro-rata

adjustment mechanism in place should applicable government royalties and taxes

be less than 30% of total revenues. The Company's Nigerian Partner on Block OML

113 is YFP, a Company substantially controlled by the father of Tunde Folawiyo,

a director of the Company.

In Benin, the PSC's with the Government of Benin require the Company to

fund 100% of all exploration and development costs of a prescribed minimum work

program. Petroleum costs (to a prescribed maximum) are recoverable out of

future production sale proceeds after payment of a 12.5% crude oil production

royalty to the Benin Government. Remaining crude is subject to a sliding scale

allocation between the Company and the Benin Government based upon daily

production. The Company is also subject to a tax on corporate profits and to an

export revenue tax.

its



A summary of the Company's Revenue Interest and Cost Obligation in each of

Benin Basin concessions is set forth below.







BEFORE PAYOUT

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



AFTER PAYOUT

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



-----------CONCESSION

COUNTRY REVENUE INTEREST

COST OBLIGATION

REVENUE INTEREST

COST

OBLIGATION

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











Block OML 113(1) Nigeria

52.5%(2)

100.0%

26.7%

40.0%

Block OPL 310(1) Nigeria

48.5%

100.0%

24.7%

40.0%

Block 1/Seme

Benin

69.0%(3)(5)

100.0%(3)(5)

50.0%(5)

100.0%(3)(5)

Block 4

Benin

75.0%(4)(5)

100.0%(4)(5)

50.0%(4)(5)

100.0%(4)(5)



- ---------------------------------(1)

The agreements governing the Company's participation in Blocks OML 113 and OPL

310 reserve

to the Nigerian government the right to acquire a Participating Interest in each of

the respective

concession blocks. If the Nigerian government elects to participate, the Company's

after-Payout

Revenue Interest could be reduced to 20.0% after accounting for the interests of

others. In such

an event, there would be a corresponding reduction in the Company's after-Payout Cost

Obligation.

See "Management's Discussion and Analysis of Financial Condition and Results of

Operations Management's Discussion and Analysis of Financial Condition and Results of Operations

- Risks and

Uncertainties - Government Right of Participation."

(2)

The Revenue Interest set forth above gives effect to (i) the interest held by

the Company's

Nigerian Partner, (ii) government royalties and taxes both before and after Payout



and (iii) a

number of gross overriding royalties that vary from concession to concession and range

from 6.4% to

2.5% before Payout and 3.2% to 1.3% after Payout. Certain of these gross overriding

royalties are

held by a company wholly owned by Wade Cherwayko, a former executive officer and

director of the

Company.

(3)

Under the terms of the Block 1 PSC, the Company is responsible for

payment of all

exploration and development costs of a prescribed minimum work program. Petroleum

costs incurred

by the Company are recoverable out of future proceeds of production after payment of a

12.5% crude

oil production royalty. In any particular year, cost recovery is limited to 69% of

total crude oil

sale proceeds. The balance of crude oil sale proceeds ("Profit Oil") is allocated

between the

Company and the Government of Benin based upon total daily production in

accordance with the

following progressive scale:

AVERAGE DAILY

- -----------------PRODUCTION (BOPD)

GOVERNMENT SHARE

COMPANY SHARE

- ------------------ ----------------- -------------0 to 5,000

50%

50%

5,001 to 10,000

55%

45%

10,001 to 20,000

60%

40%

20,001 to 50,000

65%

35%

50,000 to 100,000

70%

30%

Over 100,000

75%

25%

(4)

Under the terms of the Block 4 PSC, the Company is responsible for

payment of all exploration and development costs of a prescribed minimum work

program.

Petroleum costs incurred by the Company are recoverable out of future

proceeds of production after payment of a 12.5% crude oil production royalty.

In any particular year, cost recovery is limited to 75% of total crude oil sale

proceeds. The balance of crude oil sale proceeds ("Profit Oil") is allocated

between the Company and the Government of Benin based upon total daily

production in accordance with the following progressive scale:

-14

Oil

AVERAGE DAILY

- ----------------PRODUCTION (BOPD) GOVERNMENT SHARE

COMPANY SHARE

- ----------------- ----------------- -------------0 to 100,000

50%

50%

over 100,000

55%

45%

Condensate

AVERAGE DAILY

- ----------------PRODUCTION (BOPD) GOVERNMENT SHARE

COMPANY SHARE

- ----------------- ----------------- -------------0 to 100,000

45%

55%

over 100,000

50%

50%

(5)

the



The Company may also be subject to a 55% tax on profits received from

sale of petroleum (after full cost recovery including capital and operating



costs). An export revenue tax of 3.12% of the FOB value of the petroleum sold

is also applicable to petroleum exported to a location outside of Benin.



RESERVES

Niger Delta

- -----------The following table sets forth certain summary information at December 31,

1997 contained in the Reserve Report prepared by Gilbert Laustsen dated April

13, 1998 of the gross and the Company's net oil and condensate reserves and the

Present Value of such reserves on a constant price and cost basis after

adjustment for applicable Nigerian taxes and royalties, as understood by the

Company and gross overriding royalties or their equivalent and interests held by

the Company's Nigerian Partners. ALL OF THE RESERVES REFERENCED IN THE RESERVE

REPORT WERE DISPOSED OF BY THE COMPANY ON JUNE 30, 1998 AS PART OF THE ONGOING

REORGANIZATION OF ITS OIL AND GAS OPERATIONS.

All of the Company's reserves reflected in the Reserve Report relate to the

Ima Field located on Concession Blocks OML 112 and OPL 237. The Reserve Report

also identified natural gas reserves, however, such reserves have not been

assigned economic value as no market currently exists. No Reserve Report has

been filed by the Company with any U.S. or Canadian Federal regulatory agency

since the beginning of the last fiscal year.

The Reserve Report revises previous reserve reports prepared by Gilbert

Laustsen dated August 1, 1995, November 15, 1995, September 1, 1996 and May 13,

1997. The forecasts shown in the Reserve Report reflect updated production

facility capital, lease and operating expenditures, change in the constant price

per barrel of oil and the commencement of production on the Ima Field. The

reserve information, including Present Value, have been prepared in accordance

with SEC Present Value Criteria which differs in some respects from the

requirements of Canadian National Policy No. 2-B. The Present Values set forth

in the Reserve Report do not necessarily reflect the fair market value of the

reserves evaluated. THE INFORMATION RESPECTING THE COMPANY'S RESERVES ARE

PRESENTED TO COMPLY WITH APPLICABLE SECURITIES REGULATIONS. THE COMPANY NO

LONGER HOLDS ANY INTEREST IN THE RESERVES SHOWN.

-15

BASED ON CONSTANT PRICE AND COST ASSUMPTIONS(1)





AT DECEMBER 31, 1997

---------------------------------------------------------------TOTAL PROVED

PROVED



PROVED NON-



TOTAL



50% OF



AND 50%

PRODUCING



PRODUCING



RESERVES



RESERVES



---------



PROVED



PROBABLE



PROBABLE OF

RESERVES



RESERVES(2)



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



---------



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



---



















RESERVES

----------

Oil and Condensate

Gross Reserves(3)(MMB)

28.6

-----------



3.8



18.3



22.1



6.5



----------



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



---------



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



---



Company's Net Reserves (4)(5)

20.5



2.8



13



15.8



4.7



----------



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



---------



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



---



----------Present Value of Company's Net

Reserves (in $millions) (1)(6)

Undiscounted

$

11.7 $

65.6 $

77.1 $

41.9 $

119.0

Discounted at 10%

11.4

53.1

64.5

30.7

95.2

Discounted at 15%

11.2

48.4

59.6

26.5

86.1

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

- ------------------------------(1)

Utilizing SEC Present Value criteria based on a constant price of $16.20 per

barrel (being

the price in effect on December 31, 1997). The SEC Present Value differs from the

Present Value

utilized under Canadian National Policy 2-B in that the SEC Present Value is based

upon a price

per barrel on the date the SEC Present Value is calculated. The Canadian Present

Value is based

upon an estimated average price per barrel of oil for the year following the date

the Canadian

Present Value is calculated.

(2)

A risk factor of 50% has been applied to Probable Reserves and to the

future estimated

cash flow from Probable Reserves to account for the geological and engineering risk

associated

with these reserves.

(3)

Gross Reserves reflects total cumulative reserves held by all

participants.

(4)

Net Reserves reflects reserves attributable to the Company after

adjustment of the

Company's understanding of applicable Nigerian taxes and royalties, and gross

overriding

royalties or their equivalent and interests held by the Company's Nigerian

Partners.

(5)

The total proved production forecast reflected in the Reserve Report is

developed based on

the following assumptions:

- Based on the inclusion of two wells forecast to be placed on production in

April 1998 and

January 1999, respectively.

- Gas injection is increased to a minimum of 40 MMCFD into the Upper

C-1 Zone.

- With pressure maintenance, production from three existing wells is stabilized at

6,200 bopd

until the end of 1999 and then forecast to decline to depletion of the

assigned reserves.

- Pressure maintenance is implemented in the Lower C-1 Zone by January 1,

1999 with gas

injection at 65 million cubic feet per day or water injection at 50,000 barrels of

water per day.

- With pressure maintenance, production from three existing wells is forecast to be

stabilized

at 6,500 bopd until mid-year 2000 and then decline thereafter to depletion of

the assigned

reserves.

The total proved plus probable production forecast includes the following

additional

assumptions:



- Two wells are forecast to be placed on production in the first half of 1999 with

production

at a rate of 2,500 bopd per well.

- The flat life production period of the Upper C1 zone is extended by

one year.

- Place the D zone on production from one additional well.

(6)

The economic parameters used to determine the present value are as

follows:

- Constant crude oil price of $16.20/barrel

- Operating cost of $32.3 million per year

- Overhead cost of $7.2 million per year

- Government tax/royalty of 18.5%

- Indigenous company royalty/carried interest of 10.0%

- Drilling cost of $7.3 million per well



Benin Basin

- ------------16

Between November 1996 and March 1997, the Company drilled and completed two

off-shore wells on the Aje Field of Nigerian Block OML 113. The wells tested

maximum flow rates of 5,500 and 8,800 barrels of oil per day, respectively, with

associated natural gas. Subsequent analysis of log results and seismic data

indicate that, in addition to oil, significant natural gas resources are located

in the Aje Field. Although identified by exploration drilling, no reserves or

Present Value has been assigned to the Aje Field on the basis that no market

currently exists for the Aje Field's natural gas resources. The Company is

currently negotiating with a major international natural gas producing and

electrical power generating company and the Government of Benin for the

development, financing and construction of a natural gas powered electrical

generation power plant which is anticipated will provide electrical energy to

Benin and the neighboring countries of Togo and Ghana. Natural gas feedstock is

expected to be supplied from the natural gas resources identified in the Aje

Field and from Benin Block 1. The completion of a power plant is expected to

establish a market for the Company's natural gas resources. See "Management's

Discussion and Analysis of Financial Condition and Results of Operations - Risks

and Uncertainties - Liquidity" and "Risks and Uncertainties - Benin Regulation".

RESERVE



RECONCILIATION



The following table contains a reconciliation of Proved Reserves on a

constant price basis from December 31, 1996 to June 30, 1998 when all of the

Company's Proved Reserves were disposed of.









PROVED RESERVES AT DECEMBER 31, 1996(4)



PROVED RESERVES (MMBBLS)(1)(5)

---------------------------------GROSS RESERVES(2) NET RESERVES(3)

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



47.7

23.5

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



Add:

Discoveries, additions, extensions

Purchases and Sales

Economic/Technical Revisions



(19.5)



(4.3)



(6.1)

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



(3.4)

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



Subtract:

Production



PROVED RESERVES AT DECEMBER 31, 1997



22.1



15.8



-



-



Add:

Discoveries, additions, extensions

Purchases

Economic/Technical Revisions

Subtract:

Production and Sales

PROVED RESERVES AT DECEMBER 31, 1998(5)



22.1

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



15.8

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



=================



===============





- ------------------------------(1)

Proved Reserves are those reserves estimated as recoverable under current

technology and existing economic conditions, from that portion of the reservoir which

can be reasonably evaluated as economically productive on the basis of analysis of

drilling, geological, geophysical and engineering data, including reserves to be

obtained by enhanced recovery processes demonstrated to be economic and technically

successful in the subject reservoir. Includes oil and condensate.

(2)

Gross Reserves reflect total cumulative reserves held by all participants.

(3)

Net Reserves reflect reserves attributable to the Company after adjustment of

the Company's understanding of applicable Nigerian taxes and royalties, gross

overriding royalties or their equivalent and interests held by the Company's Nigerian

Partner.

(4)

Based on a May 13, 1997 reserve report prepared by Gilbert Laustsen.

(5)

All of the Proved Reserves of the Company are situated in the Niger Delta.

These reserves were disposed of in June 1998. See "Business - History and Development

of the Business - Restructuring of Operation and Financial Affairs".



CAPITAL



EXPENDITURES



The following table is a summary of the capital expenditures made by the

Company on acquisition, exploration, drilling and production activities on its

oil and gas properties for the fiscal periods indicated. In all cases, the

total capital expenditures on the Company's oil and gas properties includes a

provision for decline in property values. For the twelve months ended December

31, 1997, a total of $110.9 million was spent on the Company's oil and gas

properties compared to capital expenditures of $15.2 million for the twelve

months ended December 31, 1998.

-17





TWELVE MONTHS ENDED

-------------------------------DEC. 31

DEC. 31

DEC. 31

TOTAL TO

1996



1997



1998



DEC. 31



1998(1)

-------



---------



----------



---------



-------



















($000)

NIGER DELTA CONCESSIONS

Land and Data Acquisitions

10,211

Exploration, Drilling and Seismic

132,068

Production Facilities



$



-



$



1,200



-



11,128



61,497



13,222



93,670



2,862



-



102,177

Administration and Capitalized Interest

9,461

Acquisition of Royalty Interest

13,536

Acquisition by Plan of Arrangement

28,038

Depreciation, Depletion and Amortization

(32,452)

Provision for Decline in Property Values

(206,019)

Disposition of Niger Delta Concessions(2)

(57,020)



1,896



-



-



-



13,536



-



-



-



-



-



(28,159)



-



(206,019)



---------



-



(4,244)

(57,020)



----------



---------



(155,083)



(48,042)



----------



---------



-------



-------TOTAL NIGER DELTA



106,694



---------



-------



-------BENIN BASIN CONCESSIONS

Land and Data Acquisitions

9,125

Exploration, Drilling and Seismic

78,469

Administration and Capitalized Interest

2,782

Acquisition of Royalty Interest

6,036

Provision for Decline in Property Values

(3,981)



600



1,525



2,000



52,136



24,311



-



687



-



2



-



6,036



-



-



(3,981)



-



---------



----------



---------



-------



-------TOTAL BENIN BASIN

92,431



53,423



27,891



2,002



---------



----------



---------



$160,117



$(127,192)



$(46,040)



-------



-------TOTAL BENIN BASIN/NIGER DELTA

92,431



========= ========== =========

===============



- ------------------------------(1)

The total includes all expenditures since the Company initiated oil and gas

operations

in Nigeria and Benin.

(2)

See "Business - History and Development of the Business - Restructuring of

Operations

and Financial Affairs".



OIL



AND



GAS



DRILLING



ACTIVITIES



All of the Company's drilling activities have been in Nigeria. No wells

have been drilled to date by the Company in the Republic of Benin. The table

that follows sets out the gross and net number of productive and dry wells

drilled and completed in the periods indicated.

-18







FOR THE 12



FOR THE 12



FOR THE 12



MONTHS ENDED



MONTHS ENDED



DEC. 31, 1996(1)



DEC. 31, 1997(1)



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



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



MONTHS

ENDED



CUMULATIVE TO

1998(1)

--



DEC. 31,



DEC. 31, 1998

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



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



GROSS

NET

GROSS

NET

GROSS

NET

GROSS

NET

LOCATION OF WELLS

WELLS(2) WELLS(3) WELLS(2) WELLS(3) WELLS(2)

WELLS(3) WELLS(2) WELLS(3)

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

















NIGER DELTA CONCESSIONS:

Productive Oil and

Condensate

1.0

10.0

4.78

Dry and Abandoned

--



--------



--------



-



3.0



1.4



2.0



-



-



-



-



-



--------



--------



--------



--------



--------



-



-



3.0



1.4



2.0



--------



--------



--------



--------



--------



1.0



0.5



1.0



0.5



-



-



-



-



-



-



--------



--------



--------



--------



--------



1.0



0.5



1.0



0.5



-



--------



--------



--------



--------



--------



1.0



0.5



4.0



1.9



2.0



------



--------



Total Drilled Wells

1.0

10.0

4.78

--



-



------



--------



BENIN BASIN CONCESSIONS:

Productive Oil and Condensate

-



2.0



1.0



Dry and Abandoned

1.0

0.51

--



--------



Total Drilled Wells

3.0

1.51

--



--------



------



--------



------



--------



TOTAL DRILLED WELLS

1.0

13.0

6.29



======== ======== ======== ======== ========

======== ======== ========



- ----------------------------(1)

"Reflect wells completed in the periods indicated.

(2)

Gross Wells" are the total number of wells in which the Company has a

Participating Interest.

(3)

"Net Wells" are the aggregate of the percentage of Revenue Interest of the

Company in each of the

Gross Wells. In all cases, the Revenue Interest shown is before payout. The Revenue

Interest of the Company

declines after payout. See "-The Niger Delta - Cost Obligations and Revenue

Interests" and "- Benin Basin -



Cost Obligations



AREA



and



Revenue



Interests".



HOLDINGS



As at December 31, 1998, following the disposition of its Participating

Interest in the shallow zones of Ima Field, the Company's crude oil, natural gas

and natural gas liquids holdings consisted of approximately 148,000 gross acres

and 14,800 net acres in the Niger Delta and approximately 3.5 million gross

acres and 2.1 million net acres in the Benin Basin. Pursuant to the disposition

of its Participating Interest in the Niger Delta in June 1998, the Company no

longer holds proved or unproved acreage in the Niger Delta. Rather, the

Company's net acreage position is restricted to 10% Participating Interest in

the Deep Ima Prospect in respect of which there is currently no proved or

probable reserves.

-19





The following

1998.



table



summarized the Company's land holdings as of December 31,



CONCESSION

ACQUIRED

PARTNER PROVED ACREAGE(1)(2)

UNPROVED

ACREAGE(1)(3)

- ------------------------ ---------- ------- -------------------- ----------------------GROSS

NET

GROSS

NET

ACRES(4)

ACRES(5)

ACRES(4)

ACRES(5)

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













NIGER DELTA

Block OML 112 (6)

13,410(7)

Block OPL 237 (6)

1,433(7)



Aug. 1993



Amni



-



-



134,100



Dec. 1994



Amni



-



-



14,335



----------



-------



--------



----------



----------



-



-



148,435



--------



----------



----------



------



-----Total Niger Delta

14,843

----------



-------



June 1993



YFP



-



-



410,000



Dec. 1996



Optimum



-



-



490,000



Sept. 1997



-



-



-



720,000



Sept. 1997



-



-



-



1,900,000



----------



-------



--------



----------



----------



-



-



3,520,000



--------



----------



----------



------



-----BENIN BASIN

Block OML 113

215,250

Block OPL 310

237,650

Block 1

434,700(8)

Block 4

1,246,800(8)

-----Total Benin Basin

2,134,400

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



-------



------



------



TOTAL AREA HOLDINGS

2,149,243



-



-



3,668,435



========== ======= ======== ========== ==========

============



- -----------------------(1)

As at December 31, 1998

(2)

"Proved Acreage" means the acreage to which the Company has assigned

Proved

Reserves at December 31, 1998.

(3)

"Unproved acreage" refers to the acreage to which the Company has

assigned no

Proved Reserves.

(4)

"Gross Acres" means all acreage in which the Company has a Participating

Interest.

(5)

"Net Acres" means Gross Acres after deducting interests of all other

participants.

In each case, the Net Acres is shown before Payout. The Net Acres position will

decline

after Payout is achieved. See "- Niger Delta - Cost Obligations and Revenue Interests"

and

"- Benin Basin - Cost Obligations and Revenue Interests".

(6)

The Company released its Participating Interest in the shallow zones of the

Ima

Field located on this concession block in June 1998. Acreage references are

restricted to

the Deep Ima Prospect only.

(7)

Reflects interest in the Deep Ima Prospect only.

(8)

Net Acres calculated based upon Cost Oil Recovery attributable to the Company

after

giving effect to a 12.5% crude oil production tax payable on gross production. Does

not

account for an additional sliding scale royalty that becomes payable by the Company to

the

Benin government based upon average daily production rate.



OPERATIONS



AND



PRESENT



ACTIVITIES



Historically, operations in Nigeria have been conducted jointly by the

Company, as technical partner and the applicable Nigerian Partner, as named

operator. In the Niger Delta, the Company is no longer the technical partner on

blocks OML 112 or OPL 237. In the Benin Basin, the Company continues to be the

technical partner for Concession Block OML 113 and OPL 310. The Company is also

the operator of Block 1 and Block 4 in Benin. The Company is currently

evaluating the sale/farmout of part or all of its Participating Interests in

these concessions. The role of the Company as operator is dependant upon the

outcome of future farm-out arrangements.

Due to the restructuring of its affairs in June 1998, the Company is not

currently conducting drilling activities nor does it currently own production or

refining facilities. The ability of the Company to drill or participate in

future wells or to secure or construct a suitable production or refining

facility to produce any discoveries is dependant upon the Company securing

sufficient financial resources or a suitable industry partner. There is no

assurance that the Company will be able to attract new equity, debt, joint

venture partners, buyers, merger partners or a combination thereof in order to

remain viable and continue operations. See "Management's Discussion and

Analysis of Financial Condition and Results of Operations - Risks and

Uncertainties - Liquidity".

-20

PRODUCTION



FACILITY



Components

- ---------On June 30, 1998, the Company conveyed its entire interest in the MOPU

situated on the Ima Field to a major international service company in exchange

for the extinguishment of approximately $18.8 million of debt, representing all

of the debt due from the Company to the international service company.

Consequently, the MOPU ceased to be a material asset of the Company at its most

recently completed year end. See "Business - History and Development of the

Business - Restructuring of Operations and Financial Affairs"

Financing

- --------In order to fund a portion of the capital and installation costs for the

MOPU and the drilling of certain wells on the Ima Field, the Company and Amni

entered into a $30.0 million credit facility (the "European Bank Facility") with

two European banks in August 1996. In July 1997, the Company received a Secured

Loan of $35.0 million under a crude oil pre-payment agreement, the proceeds of

which were used to fully repay the European Bank Facility and for exploration

and development costs on the IMA Field. On June 30, 1998, the Secured Loan was

restructured as part of the Company's overall financial restructuring. The

restructuring of the Secured Loan by the Secured Lender enabled the Company to

defer quarterly interest payments until December 31, 1998 and to extend the

maturity of approximately $20.1 million of the loan until June 30, 1999, with

the remainder of $10.6 million due on December 31, 1999. The terms of its

agreement with the major international service company, provided that if a

future sale price of the MOPU is above a pre-determined threshold, a portion of

the proceeds of sale will be applied to reduce the Company's obligations under

its existing Secured Loan.

Subsequent to December 31, 1998, the Company received confirmation from the

Secured Lender that the interest payment due December 31, 1998 had been

capitalized and that the first payment was amended to March 31, 1999. The

Secured Lender has since advised the Company that, notwithstanding its written

extension, payment of the first interest instalment was due on December 31,

1998. The Company has not yet made this interest payment and is currently

negotiating with its Secured Lender regarding further relief from this and other

near-term cash interest payments. There is no assurance that such negotiations

will be successful. See "Management's Discussion and Analysis of Financial

Condition and Results of Operations - Risks and Uncertainties - Financing

Risks".

The Company has granted security to the Secured Lender in respect of its

repayment obligations under the Secured Loan. Included as security to the

Secured Lender are (1) a pledge of all of the common shares of those

subsidiaries that hold Participating Interests in the Company's Niger Delta and

Benin Basin Concessions; (2) a series of debentures granting a security interest

against the Company's Participating Interest in its Niger Delta and Benin Basin

Concessions; and (3) a guarantee of Abacan for all outstanding amounts under the

Secured Loan. See "Management's Discussion and Analysis of Financial Condition

and Results of Operations - Risks and Uncertainties - Financing Risks".

MARKETING



AND



SALE



OF



PETROLEUM



Prior to the relinquishment of its Participating Interest in the Ima Field,

the Company sold its crude oil production to a major international oil marketing

company pursuant to the terms of a Crude Oil Sale Agreement dated August 29,

1996. The Crude Oil Sale Agreement was terminated in June 1998 concurrent with

the restructuring of the Company's oil and gas operations and financial affairs.

Consequently, the Company has no existing crude oil delivery commitments.

-21

INSURANCE,



OPERATING



HAZARDS



AND



UNINSURED



RISKS



Prior to the restructuring of its oil and gas operations and as protection

against operating hazards, the Company maintained insurance coverage against

some, but not all, potential losses. Following the disposition of its

Participating Interest in the Ima Field the Company cancelled all policies of

insurance that related to its involvement as an operator and producer of oil and

condensate. The Company anticipates that it will obtain future insurance

coverage, as is prudent for the Company, based upon the nature and extent of the

exploration and development activities being conducted by the Company. Losses

could, however, occur for uninsurable or uninsured risks or in amounts in excess

of any existing or future insurance coverage. The occurrence of an event that

is not fully covered by insurance or that is uninsured could have a material and

adverse impact on the Company's financial condition and results of operations.

See "Management's Discussion and Analysis of Financial Condition and Results of

Operations - Risks and Uncertainties - Oil and Gas Exploration, Development and

Production".

ITEM



3.



LEGAL



PROCEEDINGS



As at December 31, 1998, the Company is not involved in any lawsuits where

the claim for damages for any such lawsuit exceeds 10% of the value of the

Company's current assets except as indicated below:

1.



Weatherford Enterra U.S. L.P. v. Abacan Resource Corporation et. al.

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



Action commenced by Weathorford Enterra U.S. L.P. (the "Plaintiff") in 1998 in

the 61st Judicial District Court, Harris County, Texas against Abacan and four

of its affiliates alleging breach of contract and unjust enrichment. Amni

International Development Company Limited ("amni") and a subsidiary of Abacan

were parties to a Joint Venture Agreement relating to oil exploration and

development of Nigerian Concession Blocks OPL 237 and OML 112 (the "Joint

Venture"). The Plaintiff's claims arose out of transactions with respect to the

Joint Venture. The Plaintiff seeks an unspecified amount of actual damages, plus

interest, costs and legal fees. Abacan has denied the Plaintiff's claim. Abacan

is also indemnified by Amni for any of the Plaintiff's claims. Amni and the

Plaintiff have signed a settlement agreement however, the Company is not aware

if the settlement terms have been performed by Amni. On January 19, 1999, the

Plaintiff filed a non-suit of the case, without prejudice.

2.



Global Marine International Services Corporation v. Abacan Technical

------------------------------------------------------------------------Services Ltd.

- -------------Action commenced by Global Marine International Services Corporation (the

"Plaintiff") in the 125th Judicial District Court, Harris County, Texas against

Abacan Technical Services Ltd. ("Abacan Technical"), a subsidiary of the Company

on March 25, 1998 alleging breach of contract arising out of the provision of

services to Abacan Technical. The Plaintiff seeks damages of $1,963,148.80 plus

interest, costs and legal fees. Abacan Technical has denied the Plaintiff's

claims.

Abacan Technical has filed an interlocutory appeal of the trial court's order

denying its special appearance, which disputes that Texas has jurisdiction of

the Plaintiff's claims. That appeal is pending. In late December 1998, the trial

court granted the Plaintiff's Motion for Partial Summary Judgement for the full

amount of its claim, excluding legal fees, plus interest. However, the order is

subject to appeal. Pending the appeal, the Plaintiff is precluded from

finalizing proceedings in the trial court or undertaking any collection efforts.

The date of the hearing of the appeal or its disposition is uncertain at this

time.

-22



3.



SBM Offshore Contractors v. Amni International Petroleum Development

------------------------------------------------------------------------Company Limited, Liberty Technical Services Ltd. and Abacan Resources (Nigeria)

- -------------------------------------------------------------------------------Ltd.

- ---SBM Offshore Contractors (the "Plaintiff") has commenced action against Amni,

Liberty Technical Services Ltd. ("Liberty") and Abacan Resources (Nigeria) Ltd.

("Abacan Nigeria") in a suit filed in the United Kingdom. Liberty and Abacan

Nigeria are subsidiaries of Abacan. The Plaintiff claims the that the Defendants

owe it approximately $1.8 million for alleged past due invoices. The defendants

have denied the claims. Amni has indemnified the Company for any of the

Plaintiff's claims. Amni has received authorization to conduct the action on

behalf of all of the defendants.

ITEM



4.



SUBMISSION



OF



MATTERS



TO



A



VOTE



OF



SECURITY



HOLDERS



The Company had no matters requiring a vote of security holders during the

fourth quarter of fiscal 1998.

PART II

ITEM

MARKET



5.



MARKET FOR

STOCKHOLDER



THE COMPANY'S

MATTERS



COMMON



STOCK



AND



RELATED



INFORMATION



The Common Shares of Abacan Resource Corporation commenced trading on The

Toronto Stock Exchange (the "TSE") on June 14, 1995 under the trading symbol

"ABC", and on the Nasdaq National Market ("NASDAQ") on December 4, 1995 under

the trading symbol ABACF. The following table sets forth the high and low

closing sale prices of Abacan's Common Shares as reported by the TSE (in

Canadian dollars) and by NASDAQ (in U.S. dollars) for the periods indicated.









1997

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

1998

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

1999

January

February

March 1-20





NASDAQ

-----------------------(US $)

High

Low

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





TSE

-------------(Canadian $)

High

Low

------ -----





$ 11.7500

9.0000

4.0000

3.5156



7.8125

1.8125

2.4375

1.5625



$15.65

12.45

5.50

4.85



$10.75

2.50

3.35

1.38



2.6250

1.6250

0.9375

0.5625



1.4062

0.3438

0.2188

0.1562



3.64

2.25

1.38

0.88



1.75

0.52

0.34

0.27



0.4375

0.2812

0.2500



0.2188

0.1562

0.1562



0.67

0.40

0.38



0.36

0.23

0.25



$



-23

The Company has received notice from The Nasdaq Stock Market Inc.

("Nasdaq") that its common shares are not in compliance with the $1.00 minimum



bid price requirement for ongoing listing on the Nasdaq National Market System.

In order to endeavor to achieve compliance, the Company's shareholders will be

asked to consider and approve at a Shareholders Meeting scheduled for March 29,

1999, a resolution authorizing the directors, in their discretion, to give

effect to a reverse stock split of the Company's common stock. In the event the

Company's common stock does not satisfy the $1.00 minimum bid price requirement

(which is the only requirement it does not currently comply with) by April 7,

1999, the Company's common shares will be de-listed from Nasdaq's National

Market System. The Company must also meet all other Nasdaq requirements on an

on-going basis. The Company's common shares are not currently eligible for

listing on the Nasdaq Smallcap Market.

There is no assurance that shareholders' approval will be obtained for a

reverse-stock split or if obtained, that the directors will proceed with a

reverse stock split. There is no assurance that if a reverse stock split is

completed that the minimum bid price will rise above or be sustained above the

$1.00 minimum bid requirement or that the Company's common stock will not be

delisted for some other reason. A delisting of the Company's common stock from

the Nasdaq National Market System will be materially adverse to the liquidity of

the Company's common stock.

The Company has received notification from The Toronto Stock Exchange that

it does not currently meet the TSE's requirements for a reverse stock split.

Consequently, if the Company elects to proceed with the reverse stock split

without meeting the applicable TSE requirements, its common shares will be

delisted from the TSE immediately prior to the completion of the reverse stock

split. A delisting of the Company's common shares from the TSE may be materially

adverse to the liquidity of the Company's shareholders, particularly

shareholders who reside in Canada. If the Company's common shares are delisted

from the TSE, Canadian residents would have to trade their shares on the Nasdaq

National Market System (provided the Company meets all Nasdaq continued listing

requirements referenced above). Quotations on the Nasdaq National Market System

are in U.S. dollars. Consequently all purchases and sales of the Company's

common shares would be in U.S. rather than Canadian currency. See "Management's

Discussion and Analysis of Financial Condition and Results of Operations - Risks

and Uncertainties - Stock Market Maintenance Requirements".

HOLDERS

the



As of December

Abacan's Common



31, 1998, there were approximately 1997 record holders of

Stock.



DIVIDENDS

Abacan has not previously paid any cash dividends on its Common Stock and

does not anticipate or contemplate paying dividends on the Common Stock in the

foreseeable future. It is the present intention of management to utilize all

available funds for the development of the Company's business. In addition, the

Company may not pay any dividends on common equity unless and until all dividend

rights on outstanding preferred stock, if any, have been satisfied. The only

other restrictions that limit the ability to pay dividends on common equity or

that are likely to do so in the future, are those restrictions imposed by law or

by certain credit agreements.

-24

SALE OF



NON-REGISTERED



SECURITIES



In connection with the restructuring of the Company's Secured Loan in June

1998, the Company agreed to issue options to acquire 600,000 common shares to

the Secured Lender. The exercise price of the options is Cdn $0.91 per common

share expiring June 30, 2000. The common shares issuable upon exercise of the

options were exempt from registration requirements of the Securities Act of

1933.



ITEM



6.



MANAGEMENT'S DISCUSSION

RESULTS OF OPERATIONS



AND



ANALYSIS



OF FINANCIAL CONDITION AND



The following discussion should be read in conjunction with the information

contained in the Company's audited consolidated financial statements, including

related notes, for the years ended December 31, 1997 and 1998 and its other

public filings. References herein to the Company include Abacan Resource

Corporation and its subsidiaries.

OVERVIEW



OF



1998



The Company underwent several changes during 1998 including discontinuing

its uneconomic oil and gas operations, significantly reducing its liabilities

and ongoing obligations, streamlining its administrative overhead expenses and

focusing efforts to optimize the potential value of its Benin Basin oil and gas

concessions.

SALE



OF



IMA



FIELD



A comprehensive reservoir analysis of the Ima Field completed in the spring

of 1998 suggested that the Ima Field was no longer economically producible. On

June 30, 1998, the Company reached a settlement agreement with its Nigerian

partner, Amni International Petroleum Development Company Limited ("Amni"),

regarding the Company's interests in Nigerian Concession OML 112 (formerly OPL

469), OPL 237 and the mobile offshore production unit ("MOPU") used to produce

the Ima Field. Under the agreement, the Company relinquished all rights and

interests in Concession Blocks OML 112 and OPL 237, including its interest in

the "shallow" zones of the Ima Field. The Company retained an interest in a

deep hydrocarbon prospect (the "Deep Ima Prospect") located beneath the Ima

Field. As consideration for the cancellation of the Company's rights on these

blocks, Amni assumed all of the Company's Ima Field related claims and

liabilities valued at approximately $47 million, extinguished approximately $20

million of claims it had against the Company and released any claims it had to

the Ima Field MOPU. The shallow zones encompassed all of the Company's proved

developed reserves and production.

SALE



OF



THE



MOBILE



OFFSHORE



PRODUCTION



UNIT



Concurrent with its agreement with Amni, the Company exchanged its interest

in the topside equipment on the MOPU which was being used to produce the Ima

Field, to a major international service company in return for the extinguishment

of all of the major service company's debt valued at approximately $18.8

million. Subject to a sale or disposition price of the MOPU being above a

pre-determined threshold, a portion of the proceeds of sale will be applied to

reduce the Company's obligations under its existing senior secured loan.

-25

RESTRUCTURING



OF



SECURED



LOAN



Concurrent with the above transactions, the Company also restructured its

existing senior secured loan (the "Secured Loan"). In June 1998, at the time of

the restructuring, the Company owed its senior secured lender (the "Secured

Lender") approximately $30.7 million under the secured loan agreement. The

restructuring enabled the Company to defer quarterly interest payments until

December 31, 1998 and extend the maturity of approximately $20.1 million of the

loan until June 30, 1999, with the remainder of $10.6 million due December 31,

1999. Subsequent to December 31, 1998, the Company received written

confirmation from its Secured Lender that the first quarterly interest payment

due December 31, 1998 had been capitalized and that interest payments would

commence on March 31, 1999. The Secured Lender has since advised that

notwithstanding its written extension, the first interest instalment continued

to be due on December 31,1998. The Company has not yet made this interest

payment and is currently negotiating with its Secured Lender regarding further

relief from this payment and from other near-term cash interest payments. There



is no assurance that such negotiations will be successful and that the Company

will be able to successfully defer its principal and interest payment

obligations until a future date. Failure of the Company to pay the principal

and interest amounts to its Secured Lender when due constitutes an event of

default which could result in a loss of part or all of the Company's assets and

render it insolvent.

NEW



INITIATIVES



Since the sale of the Ima Field, the Company has turned its attention

towards its significant Benin Basin acreage. The Company is focusing on two

initiatives: (1) the Benin Power Project, which is expected to be supplied fuel

from the Company's Block OML 113 and Benin Block 1 gas reserves; and (2) the

exploration of its sizeable Benin Basin Concessions (Block OML 113 and Block OPL

310 in Nigeria and Block 4, offshore Benin).

Benin Power Project

- --------------------On May 27, 1998, the Company entered into a Letter of Intent ("LOI") with a

subsidiary of a major international natural gas and electrical power generating

company and the Government of Benin for the development of an electrical power

plant to be located in Cotonou, Benin. Under the terms of the LOI, the required

natural gas feedstock for the project is expected to come from the Company's Aje

Field natural gas resources identified on Nigerian Block OML 113 and from Block

1 in Benin. Negotiations are continuing towards the signing of a definitive

Power Purchase Agreement.

Exploration of Additional Benin Basin Acreage

- -------------------------------------------------The Company continues to hold a significant position in the Benin Basin.

However, it does not currently have the financial resources necessary to explore

and develop its prospects and therefore will be reliant on third-party funding

sources to provide the necessary capital to do so. The Company continues to

explore various options with respect to securing a partner. Types of

relationships that are currently being contemplated are joint venture

transactions, farm-outs, sales of interests or a merger. The Company is

actively marketing the farm-out, sale or other disposition of its concessions to

industry participants.

LIQUIDITY,



OPERATING



AND



CAPITAL



REQUIREMENTS



AND



FUNDING



ALTERNATIVES



-26

The Company has a serious liquidity problem that casts doubt upon the

ability of the Company to continue operations in the foreseeable future. As of

December 31, 1998, the Company had cash on hand of approximately $3.3 million,

current debt of approximately $30.7 million, accounts payable of approximately

$9.7 million and royalties payable of approximately $5.4 million. The decrease

in the Company's long term debt and working capital deficiency from December 31,

1997 to December 31, 1998 is due principally to the Ima Field restructuring

described above. As a consequence of the sale of its producing properties in

June 1998, the Company does not currently have revenues or cash flow. The

Company does not anticipate generating revenues or cash flow until the

completion of the Benin Basin electrical generation project or the sale or

farm-out of part or all of its existing properties. The Company has limited

cash reserves and, despite a significant reduction in operational costs, is

continuing to incur general, administrative and other related expenses. Based

upon current expenditure levels, the cash reserves of the Company will not be

sufficient to sustain the operations of the Company at current levels. That

being the case, the Company's ability to continue as a going concern is

dependent on the following:

1.



The



development



of



the natural gas resources in Benin Basin Concession



Blocks OML 113 and OPL 310 including the development of a commercial market for

the natural gas produced in this area;

2.

Obtaining financing in the form of equity, debt or a combination thereof

in order to continue the development of the natural gas resources in the above

referenced concession blocks;

3.

of



the



4.

cash

time



Negotiating a joint venture for the continued exploration and development

West African acreage position;



Continuing to finance general and administrative expenses from existing

or financing in the form of equity, debt or combination thereof until such

as the above negotiations and financing are complete;



5.

Negotiations with certain suppliers

forbearance of the Company's secured and



to settle current liabilities and

unsecured creditors;



The Company has received an indication from a major shareholder that,

subject to the fulfillment of certain conditions, additional funding may be

available to the Company. However, there is no assurance any such funding,

joint venture transactions or asset sales will be available to the Company.

SENIOR



SECURED



LOAN



A Secured Loan was initially advanced to the Company in August 1997

pursuant to a Crude Oil Prepayment Agreement between the Company and a major

international oil marketing company. The proceeds of the Secured Loan were used

at that time to repay outstanding project financing incurred by the Company in

constructing the MOPU located on the Ima Field and for Ima Field exploration and

development costs. The $30.7 million Secured Loan was restructured on June 30,

1998. As restructured, repayment of $20.1 million was deferred until June 30,

1999 with the balance of $10.6 million due on December 31, 1999. Interest

payments were to commence quarterly on December 31, 1998. Subsequent to

December 31, 1998, the Company received written confirmation from the Secured

Lender that the first quarterly interest payment due December 31, 1998 had been

capitalized and that interest payments would commence on March 31, 1999. The

Secured Lender has since advised that notwithstanding its written extension, the

first interest instalment continued to be due on December 31,1998. The Company

has not yet made this interest payment and is currently negotiating with the

Secured Lender regarding relief from this payment and from other near-term cash

interest payments.

-27

ACCOUNTS



PAYABLE



As at December 31, 1998, the Company had approximately $9.7 million in

unsecured trade debt primarily related to its Aje Field exploration activities.

Two creditors hold approximately $8.0 million of this debt, with the remainder

held by numerous other entities. The Company continues to work to reach

settlement arrangements with its creditors. In addition to the trade creditors,

the Company continues to have a contingent liability with respect to the debts

assumed by Amni under the Ima Field restructuring. In consideration of the sale

of the Ima Field, Amni agreed to assume all of the Company's trade payables

specifically related to the development of the field and has indemnified the

Company in respect of such obligations. The Company understands that Amni has

settled a majority of the claims of the large creditors. However, there can be

no assurance that the remaining creditors will not seek redress from the Company

should Amni be unable to pay or otherwise settle their claims. Until the Benin

Basin initiatives begin to generate cash flow to the Company, the Company

anticipates it will not be in a position to settle any remaining creditor's

claims.

ROYALTIES



PAYABLE



As at December 31, 1998, royalties payable included an amount of $1.0

million owed to Abacan International Resource Management Inc. ("Airmi"), $1.4

million to Yinka Folawiyo Petroleum Company Limited ("YFP") and $2.9 million to

several other unrelated companies. All of the royalties relate to the Ima

Field. AIRMI is a company wholly owned by Wade G. Cherwayko, a former senior

executive officer and director of the Company. YFP is substantially controlled

by the father of Mr. Tunde Folawiyo, a director of the Company. Mr. Folawiyo is

also an executive officer of YFP. Until such time as the Company generates cash

flow, it will be unable to make cash settlements of its outstanding royalty

obligations.

FUTURE



WORK



COMMITMENTS



The Company has fulfilled its minimum work obligations in respect of

Nigerian Block OML 113. However, significant additional expenditures will have

to be incurred in order to produce the resources contained in the Aje Field and

elsewhere in OML 113 and to establish a market for such resources. Most

notably, the Company will have to secure a suitable offshore production facility

as well as construct a pipeline to an electrical generation project to be

located on-shore Benin. An electrical generation project, which is not yet

constructed, will have to be completed and tied into the West African

electricity grid in order for there to be a market for the Company's natural gas

resources. The Company believes that it will require an industry partner to

fund the commercial development of its resources. The Company has a commitment

to YFP to pay $5 million to be paid out of net cash flow out of future

production of Block OML 113.

Under the terms of its Block OPL 310 joint venture agreement with its

Nigerian partner, Optimum Petroleum Development Company ("Optimum"), the Company

is obligated to complete a minimum work program consisting of three wells and a

seismic program. The obligation of the Company to initiate expenditures towards

the minimum work program commences after receipt of applicable government

approval for the joint venture agreement between the Company and Optimum. The

oil prospecting licence for OPL 310 expired in February 1997, however, the

Nigerian Department of Petroleum Resources confirmed shortly after the expiry of

the OPL to Optimum that the OPL remains in good standing. Subsequently, nothing

has been received by the Company, or to the Company's knowledge, by Optimum,

that would indicate that the Nigerian authorities do not consider OPL 310 to be

valid and in good standing.

-28

Optimum has not yet secured an extension or renewal of the OPL or the

requisite joint venture agreement approval from the Nigerian Ministry of

Petroleum Resources. Despite this, Optimum has advised the Company that it

wishes the Company to proceed on the minimum work program in advance of the

required extension or renewal and receipt of requisite government approval to

the joint venture agreement.

In the Republic of Benin, the work commitments of the Company are set out

in separate Production Sharing Contracts for Block 1 and Block 4. In the case

of Block 1, the minimum work requirements include the drilling of one well and

the completion of a seismic program by the end of February 1999. The requisite

work commitment was not satisfied by this deadline. The Company is currently

negotiating an extension with the Benin Ministry and risks the loss of its

interest in Block 1 should an extension not be secured. In the case of Block 4,

the minimum work requirements include the drilling of one well and completion of

a seismic program by February 2002. The Company believes that it will require

an industry partner to fund the requisite work commitments of Block 4 and Block

1.

CAPITALIZED



COSTS



OF



PETROLEUM



AND



NATURAL



GAS



PROPERTIES



AND



EQUIPMENT



Through to December 31, 1998 the Company had expended a total of

approximately $392 million on the acquisition, exploration and development of



its concession blocks, including approximately $296 million in the Niger Delta

and $96 million in the Benin Basin. This compares to the total expenditures of

$376 million as at December 31, 1997. The capital spending in 1998 totaling

approximately $15 million included the acquisition of additional concession

interests in the Benin Basin at a cost of $2.0 million and the drilling, testing

and placing on production of the Ima #9 and Ima #10 wells at a cost of

approximately $13 million.

In 1997, the Company recorded a provision for the decline in value of the

Niger Delta properties of approximately $206 million. With the 1998 sale of

Blocks OML 112 and OPL 237, the Company disposed of its remaining interest in

the Niger Delta properties and equipment, including the hydrocarbon reserves and

related production equipment. This disposition resulted in a reduction of the

petroleum and natural gas property costs by approximately $57 million.

OIL



AND



GAS



RESERVES



With the sale of its interest in OPL 237 and OML 112, the Company sold all

of its proved producing and developed hydrocarbon reserves. The Company

conducted a 2-D seismic program on Nigerian Blocks OML 113 and OPL 310 in 1994

and 1996. Following the evaluation or the data from this program, the Company

drilled two wells on Block OML 113 that tested cumulative flow rates of 5,500

and 8,800 barrels per day of oil and condensate, with associated natural gas.

Based on the results of the Company's first two wells, the Company believes

that, in addition to oil and condensate, the Benin Basin has significant natural

gas. Based on these results, the Company also believes there is sufficient

natural gas resources in the Aje Field to supply the electrical generation power

project in Benin.

RESULTS



OF



OPERATIONS



The Company discontinued its hydrocarbon production operations due to the

sale of the Ima Field in June 1998. The tables below illustrate the significant

components of its 1997 and 1998 production operations up until the point of

sale.

-29

Production and Sales

- ---------------------The Company recognized petroleum revenues for its oil and condensate at the

time of production at the then prevailing market rate for the Company's oil and

condensate. The Company produced oil and condensate and stored its production

in a floating storage tanker ("FSO") until sufficient quantities were

inventoried for transfer to a crude tanker. Any difference between the value of

crude oil and condensate recorded at production and the amount actually realized

from the sale was recorded by the Company as income in the period of

realization.

The following table sets forth the average daily gross and net production

levels (in barrels) for the periods indicated.









January

February

March

April



Gross

Production

---------------1997

1998

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



10, 141 18, 207

12, 842 15, 358

16,880 14, 262

23, 995 14, 799



Net

Production(1)

---------------1997

1998

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



5, 578 10, 014

7, 068

8, 447

9, 284

7, 844

13, 197

8, 139



May

21, 483 13, 202

June

18, 447 11, 963

July

12, 668 N/A

August

18, 896 N/A

September 20, 079 N/A

October

16, 782 N/A

November

20, 664 N/A

December

9, 376 N/A



- ---------------(1) Net figures reflect the





11,

10,

6,

10,

11,

9,

11,

5,



816

146

967

393

043

230

365

157



7, 261

6, 580

N/A

N/A

N/A

N/A

N/A

N/A



Company's pre-payout participation before royalties



The following table sets forth information pertaining to the quarterly

production and liftings on a gross and net basis as well as quarterly revenue

and operating cost information for the Company prior to the sale of the Ima

Field on June 30, 1998.









Gross Production (bbls)

Net Production (bbls)



Three Months

Ended

March 31

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

1,436,583

790,121



Three Months

Ended

June 30

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

686,461

377,554



1,528,753

840,814



592,561

325,909



Gross Sales (bbls)

Net Sales (bbls)

Average Price

Net Revenue

Operating Costs





$

$

$



12.75

9,986

8,041



$

$

$



13.57

4,272

9,390



-30

Operating Costs

- ---------------The majority of the Company's operating costs relates to the operation of

the MOPU and FSO located on the Ima Field. Such costs were fixed on a per diem

basis. Following the sale of the Ima Field, the Company ceased to incur

operating costs.

General and Administrative Expenses

- -------------------------------------General and Administrative expenses for the year ending December 31, 1998

were approximately $4.6 million versus approximately $3.9 million for the year

ending December 31, 1997. Since the sale of the Ima Field in June 1998, the

Company has made significant strides towards reducing its overhead expenses.

The Company has closed or is in the process of closing three offices, has

reduced staff levels and has out-sourced several of its administrative

functions. Offsetting these changes, however, has been a significant amount of

additional legal and accounting expenses incurred related to the sale of the Ima

Field and the Company's ongoing restructuring process. Critical to continued

existence of the Company is the continued reduction and re-alignment of general

and administrative expenses to better reflect the Company's current situation

and future prospects. The Company currently has no revenue or cash flow and

limited cash reserves. Accordingly, the Company will require additional

financing in the near term in order to sustain its current level of operations.

Interest



and



Other



Financial



Expense



- ---------------------------------------For the year ending December 31, 1998, the Company incurred approximately

$3.0 million in interest and other financial expenses versus $4.3 million in

1997. These charges are primarily related to the Secured Lender both prior to

and following its restructuring. The December 31, 1998 quarterly interest

payment was not made. Subsequent to December 31, 1998, the Company received

written confirmation from the Secured Lender that the first quarterly interest

payment had been capitalized and that interest payments would commence on March

31, 1999. The Secured Lender has since advised that notwithstanding its written

extension, the first interest instalment continued to be due on December 31,

1998. The Company has not yet made this interest payment and is currently

negotiating with the Secured Lender regarding relief from this payment and from

other near-term cash interest payments.

Depletion, Depreciation and Amortization

- ------------------------------------------For the year ended December 31, 1998, the Company incurred approximately

$4.2 million in depletion, depreciation and amortization versus approximately

$28.2 million in 1997. The decline in 1998 expense is primarily attributed to

the 1997 write down in costs associated with the Ima Field and its sale in June

1998.

1997 Provision for Decline in Value of Petroleum Properties in the Niger Delta

- -------------------------------------------------------------------------------As a result of the application of the ceiling test and other considerations

related to the Company's intention to sell its production assets, the Company

recorded a provision for decline in the value of its Niger Delta petroleum

properties in 1997 of approximately $206 million. Application of this

write-down resulted in a remaining Niger Delta petroleum cost balance of

approximately $47 million at December 31, 1997.

-31

1998 Gain on Sale of Assets

- -------------------------------At the time of the sale of the Ima Field and the related production

facility transaction with a major international service company, the Niger Delta

petroleum properties remaining cost balance was approximately $57 million. As a

result of the above transactions, approximately $86 million in debt and other

liabilities were either extinguished or assumed by other entities. This

resulted in the Company realizing a book gain on the sale of assets of

approximately $29 million. Though these transactions resulted in a significant

book gain for the Company, no cash was received by the Company as a result of

any of the transactions.

OUTLOOK

The continuing corporate financial restructure is a critical priority and

the Company is exploring opportunities to raise additional capital, reduce the

level of total liabilities and reduce overhead costs. In addition, the Company

is exploring various options that allow for external funding for further

development of its remaining Benin Basin concession blocks, including a

farm-out, sale of interests or merger. Should the Company be unable to raise

additional capital, either directly or through a combination of a sale or

farm-out of assets, or a business combination, it will be required to cease

operations.

YEAR



2000



ISSUE



The Year 2000 problem arises with the change in century and the potential

inability of information systems to correctly "rollover" dates to the new



century. To save on computer storage space, many systems were programmed with a

two-digit century (ie. December 31, 1999 would appear as 12/31/99) assuming that

all years would be part of the 20th century. On January 1, 2000, systems with

this programming will default to 01/01/1900 instead of 01/01/2000, and

calculations using or reporting the date will not be correct and errors will

arise. To prevent this from occurring, information systems need to be updated

to ensure they recognize the Year 2000.

The Company began its Year 2000 strategy by compiling a list of all

computerized equipment and making a determination of how, if at all, the

software will be affected by the Year 2000 problem. All of the Company's

hardware and software were recently acquired and are Year 2000 compliant. All

of the data related to the Company's royalty fees, consulting fees, and other

payment obligations related to its properties are stored on its computer

systems. The Company has and will continue to back up all of its financial and

business records, property data and engineering data to ensure that no loss of

information will occur in the event that its systems are affected by Year 2000

problems.

The Company also requested all of its principal consultants, engineers,

advisors and joint venture partners to conduct similar reviews of their

computerized equipment, software and operating systems to determine the risk, if

any, that the Year 2000 problem poses to the Company. The Company has no

knowledge of any material risks that will result from the Year 2000 problem and

does not believe its business will be impacted as a result of Year 2000 problems

related to such third parties.

The Company does not anticipate it will commence drilling or other

exploration activities that will be affected by the Year 2000 problem. The

Company intends to engage only established contractors, consultants, engineers

and advisors for work related to its properties and intends to source its

exploration and development equipment and information systems from established

vendors who have designed Year 2000 compliant systems. The Company also intends

to locate alternative sources for exploration and development equipment and

information systems in the event it primary suppliers cannot meet the

requirements of the Company in a timely manner.

-32

In the event the Year 2000 problem affects the exploration and development

equipment and operating systems of the Company's third party consultants,

engineers, advisors and joint venture partners, the cost of exploration and

development of the Company's properties may increase and the Company's business

and results of operations may be adversely affected. There can be no assurance

that the Year 2000 problem will not cause delay in the exploration and

development of the Company's properties or that the Company will be able to

resolve a Year 2000 problem on acceptable terms. Any delay in exploration and

development of the Company's properties will have a material adverse effect on

the Company's business and results of operations.

The Company intends to monitor the Year 2000 problem as it relates to the

oil and gas industry and the Company's properties and to implement contingency

plans as required. Management does not anticipate incurring significant costs

in this regard.

SUBSEQUENT



EVENTS



Announcement of Listing Status

- --------------------------------On January 26, 1999, Abacan announced that it had been advised by NASDAQ

that the trading prices for Abacan's Common Stock was below the $1.00 per share

minimum established by the NASDAQ National Market for continued listing on that

market. Subject to a further extension, unless the minimum trading price is met



(during a ten day period) beginning March 22, 1999, Abacan's Common Stock will

be delisted from the NASDAQ National Market. Abacan expects to meet this

requirement by implementing a reverse stock split that will be submitted to its

shareholders at Abacan's Annual Meeting of Shareholders. Any reverse stock

split will also be subject to approval of the Toronto Stock Exchange. Abacan

has been advised that it does not meet the applicable requirements for stock

consolidation approval by The Toronto Stock Exchange. If the requirements are

not met and Abacan proceeds with the reverse stock split, its shares will be

delisted from The Toronto Stock Exchange.

Insurance claim on Ima #9 / Major Creditor Settlements

- -------------------------------------------------------------During February 1999, settlement agreements were reached with a majority of

the large creditor claims assumed by Amni in the Ima Field restructuring. The

proceeds used to settle these claims were derived by a lump sum cash payment

Amni and the Company negotiated with respect to the Ima #9 well underground

blowout claim.

RISKS



AND



UNCERTAINTIES



Liquidity

- --------The Company has a serious liquidity problem that casts doubt upon the

ability of the Company to continue operations in the foreseeable future. As of

December 31, 1998, the Company had cash on hand of approximately $3.3 million,

current debt of approximately $30.7 million, accounts payable of approximately

$9.7 million and royalties payable of approximately $5.4 million. The decrease

in the Company's long term debt and working capital deficiency from December 31,

1997 to December 31, 1998 is due principally to the Ima Field restructuring

described above.

-33

As a consequence of the disposition of its Participating Interest in Blocks

OML 112 and OPL 237 in June 1998, the Company does not currently have any

revenues or cash flow. The Company does not anticipate generating revenues or

cash flow until the completion of the Benin Basin electrical generation project

or the sale or farm-out of part or all of its existing properties. The Company

has limited cash reserves and, despite a significant reduction in operational

costs, is continuing to incur general, administrative and other related

expenses. The Company's ability to continue as a going concern is dependent on

the following:

1.

The development of the natural gas resources in Benin Basin Concession

Blocks OML 113 and OPL 310 including the development of a commercial market for

the natural gas produced in this area;

2.

Obtaining financing in the form of equity, debt or a combination thereof

in order to continue the development of the natural gas resources in the above

referenced concession blocks;

3.

of

4.

cash

time



the



Negotiating a joint venture for the continued exploration and development

West African acreage position;



Continuing to finance general and administrative expenses from existing

or financing in the form of equity, debt or combination thereof until such

as the above negotiations and financing are complete;



5.

Negotiations with certain suppliers

forbearance of the Company's secured and

of



to settle current liabilities and

unsecured creditors;



There is no assurance that the Company will be able to achieve part of all

the elements required to continue operations prior to fully exhausting its



current cash reserves. Should the Company not be able to secure new sources of

funding in the very near term, it will be required to wind up its affairs and

cease operations.

The Company will not be able to meet its payment obligations under the

Secured Loan or the contractual commitments on its existing properties without

additional capital. There is no assurance that additional capital will be

available or, if it is available, that the Company would not have to sell all or

substantially all of its properties or assets to access such capital. Should

the Company be unable to access additional capital through capital markets or

otherwise, or should the Company be unable to further restructure its existing

secured loan and extend the time pursuant to which it must commence operations

in its existing properties, the Company may lose all of its Participating

Interests in some or all of its remaining properties which would be materially

adverse to the financial condition of the Company.

Stock Market Maintenance Requirements

- ---------------------------------------The Company has received notice from The Nasdaq Stock Market Inc.

("Nasdaq") that its common shares are not in compliance with the $1.00 minimum

bid price requirement for ongoing listing on the Nasdaq National Market System.

In order to endeavor to achieve compliance, the Company's shareholders will be

asked to consider and approve at a Shareholders Meeting scheduled for March 29,

1999, a resolution authorizing the directors, in their discretion, to give

effect to a reverse stock split of the Company's common stock. In the event the

Company's common stock does not satisfy the $1.00 minimum bid price requirement

(which is the only requirement it does not currently comply with) by April 7,

1999, the Company's common shares will be de-listed from Nasdaq's National

Market System. The Company must also meet all other Nasdaq requirements on an

on-going basis. The Company's common shares are not currently eligible for

listing on the Nasdaq Smallcap Market.

-34

There is no assurance that shareholders' approval will be obtained for a

reverse-stock split or if obtained, that the directors will proceed with a

reverse stock split. There is no assurance that if a reverse stock split is

completed that the minimum bid price will rise above or be sustained above the

$1.00 minimum bid requirement or that the Company's common stock will not be

delisted for some other reason. A delisting of the Company's common stock from

the Nasdaq National Market System will be materially adverse to the liquidity of

the Company's common stock.

The Company has received notification from The Toronto Stock Exchange that

it does not currently meet the TSE's requirements for a reverse stock split.

Consequently, if the Company elects to proceed with the reverse stock split

without meeting the applicable TSE requirements, its common shares will be

delisted from the TSE immediately prior to the completion of the reverse stock

split. A delisting of the Company's common shares from the TSE may be materially

adverse to the liquidity of the Company's shareholders, particularly

shareholders who reside in Canada. If the Company's common shares are delisted

from the TSE, Canadian residents would have to trade their shares on the Nasdaq

National Market System (provided the Company meets all Nasdaq continued listing

requirements referenced above). Quotations on the Nasdaq National Market System

are in U.S. dollars. Consequently all purchases and sales of the Company's

common shares would be in U.S. rather than Canadian currency.

If the Company proceeds with the reverse stock split and thereafter fails

to meet Nasdaq's continued listing requirements, it risks the loss of listing

status on both of its current stock markets.

International Operations

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



All of the Company's operations are currently being conducted in Nigeria

and Benin. International operations are subject to political, economic and

other uncertainties, including, among others, risk of war, revolution, border

disputes, expropriation, renegotiation or modification of existing contracts,

import, export and transportation regulations and tariffs, taxation policies,

including royalty and tax increases and retroactive tax claims, exchange

controls, limits on allowable levels of production, currency fluctuations,

labour disputes and other uncertainties arising out of foreign government

sovereignty over the Company's international operations. Certain regions of

Africa have a history of political and economic instability. Such instability

could result in new governments or the adoption of new policies that might

assume a substantially more hostile attitude toward foreign investment. In an

extreme case, such a change could result in voiding pre-existing contracts and

concession agreements and/or expropriation of foreign-owed assets without

compensation. The Company's international operations may also be adversely

affected by laws and policies of the United States and Canada affecting foreign

trade, taxation and investment. Furthermore, in the event of a dispute arising

from international operations, the Company may be subject to the exclusive

jurisdiction of foreign courts or may not be successful in subjecting foreign

persons to the jurisdiction of courts in Canada.

Nigeria is a developing third world national that has experienced periods

of civil unrest and political and economic instability. In June 1998, the

country experienced a significant political change with the death of Col. Sani

Abacha and the appointment of Col. Abdulsalem Abubakar as President of Nigeria.

Under Col. Abubakar, political and social change has been initiated. These

changes included the release of a number of prominent political prisoners and

the holding of democratic elections in early March 1999. As a result of the

elections, Olusegan Obasanjo was elected to become the new President of the

country. Mr. Obasajo's government is scheduled to assume power on May 29, 1999.

-35

Despite these recent events, Nigeria's membership in the British

Commonwealth of Nations remains suspended. Pending the appointment of the new

government, the imposition of trade sanctions continues to be under

consideration by a number of western countries including Canada, the United

States and the United Kingdom. The implementation of trade sanctions may be

dependent, in large part, on the outcome of future democratic elections and the

appointment of a democratically elected government. If trade sanctions are

imposed, and if they significantly reduce the amount of oil purchased from

Nigeria or impede the ability of producers in Nigeria to market their production

or receive market prices for such production, such sanctions could adversely

affect Nigeria's oil producers and the country's overall economy. There can be

no assurance that actions taken by the international community, future political

unrest or actions by companies doing business in Nigeria will not have a

materially adverse effect on Nigeria and in turn, on the Company's financial

condition or future results of operations. The Company has no ability to

control the factors that may lead to such events.

Benin is a developing third world nation that has experienced periods of

civil unrest and political and economic instability. Future civil unrest or

political and economic instability is beyond the control of the Company and may

adversely affect any future operations of the Company in the country. The

ability of the company to successfully operate in Benin will, in large part, be

dependent upon its maintaining good relations with the Benin government and the

Benin Oil Ministry. See "- Benin Regulation".

Nigerian Regulation

- -------------------All phases of oil exploration, development and production in Nigeria are

regulated to varying degrees by the Nigerian government, either directly or

through the MPR and the DPR, under the provisions of the Petroleum Decree, 1969

and under various policy statements issued by the Nigerian government and



administrative practices followed by the DPR. Such government regulation

includes matters relating to restrictions on production, price controls, export

controls, income taxes, expropriation of property, environmental protection and

rig safety. All drilling and production programs and operations undertaken or

to be undertaken by the Company (including petroleum export permits) must be

approved by the Nigerian government through the MPR or the DPR. If the Company

is unable to obtain the requisite approvals from the DPR or the MPR for its

ongoing operations, such operations could be suspended or delayed until such

approvals are granted. In addition, the Company must, either directly, or

through its Nigerian Partners, maintain satisfactory working relationships with

the Nigerian government, the MPR and the DPR. Any suspension or delay in the

Company's operations or failure to maintain satisfactory working relationships

could materially and adversely affect the financial condition or results of

operations of the Company.

Dependence



Upon



the



Indigenous



Program



All of the Company's Participating Interests in Nigeria have been acquired

under the Indigenous Program. The Indigenous Program is not formally written

into the Petroleum Decree, 1969, or any other law of Nigeria but exists solely

pursuant to an oral policy statement (the "1990 Policy") issued by the Nigerian

Government in 1990. Should the Company's or its Nigerian Partners'

interpretation of the 1990 Policy prove incorrect, or should the Nigerian

Government change this policy, the Company and its Nigerian Partners'

Participating Interests, business and future results of operations in Nigeria

could be materially and adversely affected.

The Company relies on its Nigerian Partners for compliance with all

requirements of Nigerian law, the 1990 Policy and all dealings with the Nigerian

Government. If either the relationship between the Company and its Nigerian

Partners or that between the Company's Nigerian Partners and the Nigerian

Government deteriorates for any reason or if the Company's Nigerian Partners

cannot meet their obligations to the Company or the Nigerian Government for

financial or other reasons, the Company's financial condition and results of

operations may be adversely affected. Additionally, the Company does not

control its Nigerian Partners and may be adversely affected by the detrimental

activities of any of its Nigerian Partners or the principals thereof.

-36

Uncertainty



Regarding



Nigerian



Tax



and



Royalty



Arrangements



The Company has negotiated tax/royalty arrangements with its Nigerian

Partners on each of the Niger Delta concessions and the Benin Basin concessions

in Nigeria. These tax/royalty arrangements, included in the joint venture

agreements between the Company and its Nigerian Partners, provide for a combined

tax/royalty payment to the Nigerian Government equal to a maximum of 30% of the

gross production revenues, both before and after Payout. Notwithstanding the

tax/royalty arrangements contained in the joint venture agreements, the Company

has subsequently learned and currently believes that the tax/royalty regime

applicable to blocks awarded under the Indigenous Program are the same as

applicable to the tax/royalty regime applicable generally to petroleum

production in Nigeria. To date, the Company has paid royalties of 18.5% of

production from its Ima Field to the Nigerian government in accordance with the

existing royalty regime. The Company has not generated taxable profits and

consequently, no petroleum profits taxes have been or are expected to be paid to

the Nigerian Government. Should the Nigerian Government audit the operations

conducted on the Ima Field and disagree with the level of royalties or taxes

paid by the Company, the Company may become liable for additional payments to

the Nigerian Government.

There is no assurance that the Nigerian Government will not alter or amend

the existing royalty structure or definition of taxable profits. Any future

amendments of changes in the interpretation of the current fiscal regime that

imposes and increased royalty or tax rate upon the Company will be materially



adverse to

operations.

Assignment



the

of



Company's

Interests



business,

Under



financial position and future results of



Joint



Venture



Agreements



The 1990 Policy prohibits the assignment of an interest in a concession

block without MPR approval and also prohibits the assignment to the Company of

an interest in a concession that is greater than 40% of the Nigerian Partner's

interest. The Company's Participating Interests in Nigerian concession blocks

OML 112 and OPL 237 were, prior to the reorganization of its oil and gas

operations, governed by the terms of joint venture agreements that had been

approved by the MPR. As a consequence of the reorganization, a new joint

venture agreement reflecting a reduced Participating Interest restricted to the

Deep Ima Prospect was executed between the Company and Amni. MPR approval of

the new joint venture agreement and the revised Participating Interest of the

Company has not yet been obtained. Although the Company has no reason to

believe that the applicable MPR approval will not be received in the normal

course, there is no assurance the MPR will grant the requisite approvals.

Failure to obtain MPR approval to the new joint venture agreement could bring

into question the level of the Participating Interest of the Company, if any, in

the Deep Ima Prospect, which in turn could have a materially adverse affect on

the future results of operations of the Company.

The joint venture agreements between the Company and YFP in respect of

Block OML 113 and Optimum in respect of OPL 310, allocate to the Company an

approximate 55% beneficial interest in gross revenues prior to Payout and an

approximate 28% beneficial interest in gross revenues after Payout (before gross

overriding royalties or their equivalent payable by the Company to others). YFP

is a company substantially controlled by the father of Tunde Folawiyo, a

director of the Company. Tunde Folawiyo is also an executive officer of YFP.

The allocation to the Company of 55% of revenues before Payout could be an

assignment that exceeds the maximum allocation of revenues permitted under the

1990 Policy, notwithstanding that the MPR has approved the allocation. As a

result, the Company could have its entitlement to production revenues reduced or

its interests in the concessions blocks terminated, either of which would have a

materially adverse affect on the financial condition and future results of

operations of the Company.

-37

Governmental



Right



of



Participation



Under the Petroleum Decree, 1969, the Nigerian Government is entitled, at

any time, to take a Participating Interest in any concession block in Nigeria.

Neither the Petroleum Decree, 1969 nor any subsequent correspondence between the

MPR and any of the Company's Nigerian Partners addresses either the payment to

the Company or its Nigerian Partner of a proportionate share of future costs or

the reimbursement of past costs by the Nigerian Government. If the Nigerian

Government exercises its right to participate in any of the Company's existing

concession blocks, the Revenue Interest of the Company would be reduced and the

financial position and results of operations of the Company could be materially

affected. Under the terms of its joint venture agreements for the Benin Basin

concessions, should the Nigerian government choose to participate, the Company

does not believe its Revenue Interest would be reduced to less than a 20%

post-Payout Revenue Interest, after deducting existing gross overriding and

other royalty interests. While the Company is not aware of any efforts on the

part of the Nigerian Government to participate directly in any concession blocks

awarded under the Indigenous Program, the government has, in all cases, reserved

the right to do so.

Nigerian Title Issues

- ----------------------Expiration



or



Cancellation



of



Nigerian



Oil



Prospecting



Licenses



The Company's primary Nigerian assets are its Participating Interests in

oil and gas concession blocks OML 113 and OPL 310. The Participating Interest

of the Company is held pursuant to Joint Venture Agreements in place for the

applicable concession blocks. Such Agreements operate for the life of the OPL

and any resulting OML. In the case of Block OML 113, the Company believes that

the economic life of any reserves contained in such blocks will expire before

the expiration of the 20 year term of the OML. In the event that the productive

life of reserves exceeds the current term of the OML, a successful renewal

application will have to be made to the MPR by YFP, failing which ownership of

the block reverts to the Nigerian government. The Joint Venture Agreements

between the Company and its Nigerian Partners impose certain obligations upon

the Company, failing which the Company could forfeit its interest as prescribed

by the Joint Venture Agreement. Failure of the Company to meet such obligations

(which includes an obligation that the Company at all times be and remains

solvent) could allow the Nigerian Partner to terminate the applicable Joint

Venture Agreement and extinguish the Participating Interest of the Company in

the affected concession block. In view of the Company's current financial

circumstances, there is no assurance that one or more of its Nigerian Partners

will not endeavour to terminate its Joint Venture Agreement with the Company.

The formal five year term of the OPL 310 expired in February 1997. In

February 1997, subsequently to the expiry date, the Company's Nigerian Partner

received written confirmation from the MPR that OPL 310 was in good standing.

The Petroleum Decree, 1969 does not contemplate or authorize the term of an OPL

(inclusive of extensions) extending beyond five years. The Company believes

that the written confirmation issued on behalf of the MPR confirming OPL 310 to

be in good standing reflects an administrative practice that supersedes the

provisions of the Petroleum Decree, 1969 respecting the term of the OPL. Should

the Company's interpretation of the DPR written confirmation be incorrect, or

should neither the DPR nor the MPR have the jurisdiction to implement an

administrative practice inconsistent with the terms of the Petroleum Decree,

1969, or should the DPR or MPR change their position respecting the standing of

Block OPL 310, the Company and its Nigerian Partner may be prohibited from

continuing and pursuing future operations on Concession Block OPL 310. The

Company also could lose its entire investment and Participating Interest in

Concession Block OPL 310 without compensation.

-38

Benin Regulation

- ----------------Responsibility for the regulation and control of the petroleum industry in

Benin rests with the national government of Benin pursuant to the Benin

Petroleum Code. Specific regulation of petroleum exploration, exploitation

title, transportation, marketing and production taxation rests with the Benin

Oil Ministry. The regulation of general business operations, income taxes and

import/export licences and levies rests with a number of other ministries within

the national government of Benin. All drilling, production and other petroleum

operations in Benin require the prior approval of the Benin Oil Ministry. The

import and export of natural gas and electricity and the construction of an

electrical generation power plant will also require the prior approval of the

Benin Oil Ministry and a number of other ministries within the Benin Government.

In order to produce and/or import natural gas, construct an electrical

generation power plant and generate, transmit, sell and export electrical power,

the Company and any future partners will require the prior approval of a number

of Government Ministries and government and privately owned companies. The

Company and its partners will also require the approval of other foreign

governments, ministries and departments if it exports power generated from the

electrical generation power plant outside of Benin. There is no assurance that

the Company or its partners will be able to obtain all of the consents, permits

or authorizations necessary to import natural gas from the Aje Field or produce

natural gas from Block 1, construct an electrical generation power plant or

produce, transmit, sell or export electrical energy. Failure of the Company to



obtain all necessary approvals or permits will materially and adversely affect

its financial condition and future results of operations. See " - Liquidity".

Benin Title Issues

- -------------------The Company's current Participating Interests in Benin exist pursuant to

two separate production sharing contracts between subsidiaries of the Company

and the Nigerian Government. The PSC's set out certain obligations that must be

fulfilled by the Company. Failure to fulfill the requisite obligations

constitutes an event of default and subject the affected PSC to cancellation by

the government without compensation.

Included as part of the Company's obligations are certain minimum work

commitments. In the case of Block 1, the Company is required to drill one well

and complete a seismic program by the end of February 1999. The requisite work

commitment for Block 1was not satisfied by the February 1999 deadline. The

Company is currently negotiating an extension with the Benin Oil Ministry.

There is no assurance that the Company will secure an extension that is

satisfactory to it, or at all. If the Company fails to secure an extension, it

could lose its entire Participating Interest in Block 1 without compensation.

In the case of Block 4, the Company is required to drill one well and complete a

seismic program by February 2002. The Company has completed the seismic program

requirement. The Company currently does not and, without securing a financial

partner or other form of financing, will not have the financial resources to

drill the requisite well on Block 4 by February 2002. Failure to comply with

the minimum work requirements could result in the cancellation or termination of

the Company's Participating Interest in Block 4. The loss of its Participating

Interest in Benin Blocks 1 and 4 would have a material and adverse affect on the

Company.

Labour Relations and Interruptions

- ------------------------------------Nigerian and Benin laws require that foreign companies involved in the

petroleum industry hire and train indigenous personnel in petroleum operations.

Nigerian oil workers are organized into a number of labour unions. In the fall

of 1994, these labour unions called a general strike to protest against a number

of the political changes that had occurred within Nigeria. This general strike

ultimately affected the Company's oil and gas operations by delaying its

drilling program. There is no assurance that there will not be strikes in the

future in countries where the Company operates. Any future labour interruptions

could adversely affect the Company's ongoing operations and its ability to

explore for, produce, market and sell its oil and condensate reserves.

Oil and Gas Exploration, Development and Production

- --------------------------------------------------------Oil and gas exploration involves a high degree of risk and there is no

assurance that expenditures made on future exploration by the Company on its

properties will result in new discoveries of oil, condensate or natural gas that

are commercially or economically producible. It is difficult to project the

costs of implementing an exploratory drilling program due to the inherent

uncertainties of drilling in unknown formations, the costs associated with

encountering various drilling conditions such as overpressured zones and tools

lost in the hole, and changes in drilling plans and locations as a result of

prior exploratory wells or additional seismic data and interpretations thereof.

Production and development of offshore oil, condensate and natural gas

properties also involve an increased degree of risk relative to on-shore or

close-to-shore production and development primarily due to greater technical

obstacles.

-39

The



Company's



operations



are



subject



to



the



risks



of



exploration,



development and operation of oil, condensate and natural gas properties and the

drilling of wells thereon, including encountering unexpected formations or

pressures, premature declines of reservoirs, blow-outs, craterings, sour gas

releases, fires and spills. Losses resulting from the occurrence of any of

these risks could have a materially adverse affect on the Company. The Company

may become subject to liability for pollution, blow-outs or other hazards. The

payment of such liabilities would reduce the funds available to the Company or

could result in the total loss of the Company's Participating Interests.

Depletion of Reserves; Necessity of Successful Exploration and Development

- -------------------------------------------------------------------------------Producing oil and natural gas reservoirs generally are characterized by

declining production rates that vary depending upon reservoir characteristics

and other factors. The Company's future oil and natural gas reserves and

production, and, therefore, cash flow and income, are highly dependent upon the

Company's success in economically finding additional reserves that are

economically recoverable. There can be no assurance that the Company will be

able to find, finance, develop or acquire additional reserves.

Uncertainty of Reserve Estimates

- ----------------------------------There are numerous uncertainties inherent in estimating quantities of

reserves and the present value of net cash flows attributable to such reserves.

Such estimates represent subjective judgments based on available data and the

quality of such data. Different reserve engineers may make different estimates

of reserve quantities and the present value of net cash flows attributable to

the production of such quantities. Substantial revisions to the reserve

quantities and present value estimates may be necessary due to numerous factors,

including the results of drilling, testing and production and changes in the

assumptions regarding decline and production rates, taxes, royalties, prices and

costs made after the date of a reserve estimate. The reserve estimates included

and incorporated by reference in this document could be materially different

from the quantities and values ultimately realized.

Prices, Markets and Marketing of Crude Oil and Condensate

- ----------------------------------------------------------------Oil, condensate and natural gas are commodities whose prices are determined

based on world demand, supply and other factors, all of which are beyond the

control of the Company. World prices for oil and condensate have fluctuated

widely in recent years and, most recently have been characterized by a

significant decline in value. Future price fluctuations in world oil prices

will have a significant impact upon the economics of the Company's undeveloped

properties and the projected revenue of the Company.

Financing Risks

- ---------------On June 30, 1998, the Company restructured its financial affairs including

its Secured Loan. The Company has granted security to the Secured Lender in

respect of its repayment obligations under the Secured Loan. The Secured Loan

includes a number of events of default. In the event of the Company's default

under the terms of the Secured Loan, the Secured Lender may call upon the

Company to immediately pay the outstanding principal or interest due thereunder,

or take title to, sell or otherwise dispose of the common shares of

substantially all of the Company's subsidiaries. Should the Secured Lender

become entitled to realize upon their security, the Company may lose part or all

of its Participating Interest in part of all of its oil and gas properties. The

Company may currently be in default of one or more terms of the Secured Loan.

ITEM



7.



CONSOLIDATED



SUPPLEMENTARY



DATA



FINANCIAL



STATEMENTS



AND



UNAUDITED



U.S.



GAAP



RECONCILIATION



The Company's Audited Consolidated Financial Statements for the fiscal year

ended December 31, 1998 (the "1998 Financial Statements") have been prepared in

accordance with generally accepted accounting principles in Canada. These

principles differ in some respects to generally accepted accounting principles

in the United States. The Company's 1998 Financial Statements include "Comments

by Auditors for U.S. Readers on Canada - U.S. Reporting Difference" as a

supplement to the Auditors' Report. In addition, a detailed discussion entitled

"Differences in Generally Accepted Accounting Principles Between Canada and the

United States" is included as Note 12 of the 1998 Financial Statements. See

"Consolidated Financial Statements and Unaudited Supplementary Data".

-40

AUDITORS' REPORT

To the Shareholders of

ABACAN RESOURCE CORPORATION:

We have audited the consolidated balance sheets of ABACAN RESOURCE CORPORATION

as at December 31, 1998 and 1997 and the consolidated statements of operations

and deficit and changes in cash flow for the years then ended. These financial

statements are the responsibility of the Company's management. Our

responsibility is to express an opinion on these consolidated financial

statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted

in Canada. Those standards require that we plan and perform an audit to obtain

reasonable assurance whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting

the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all

material respects, the financial position of the Company as at December 31, 1998

and 1997, the results of operations and changes in its financial position for

the years then ended in accordance with accounting principles generally accepted

in Canada.



Calgary,

February



Alberta

17, 1999



/s/ Deloitte & Touche LLP

Chartered Accountants



Note: See separate Comments

Reporting Difference



by



Auditors



for



U.S.



Readers



on Canada-U.S.



COMMENTS BY AUDITORS FOR U.S. READERS

ON CANADA-U.S. REPORTING DIFFERENCE

In the United States, reporting standards for auditors require the addition of

an explanatory paragraph (following the opinion paragraph) when the financial

statements are affected by conditions and events that cast substantial doubt on

the Company's ability to continue as a going concern, such as those described in

Note 1 to the consolidated financial statements. Our report to the

shareholders, dated February 17, 1999 is expressed in accordance with Canadian

reporting standards which do not permit a reference to such events and

conditions in the auditors' report when these are adequately disclosed in the

financial statements.



Calgary,



Alberta



/s/



Deloitte



&



Touche LLP



February



17,



1999



Chartered



Accountants



-41





ABACAN RESOURCE CORPORATION

CONSOLIDATED BALANCE SHEETS

AS AT DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)



--

--ASSETS

CURRENT

Cash

1,813

Accounts Receivable

15,267

Inventory

627



1998

----------



1997

-------





----------





-------



$



$



3,305

31

-



----------



-------



--3,336

17,707

Petroleum and natural gas properties

(utilizing the full cost method of accounting) (Notes 1 and 3)

138,471

Deposits and other

3,204



92,431

42

----------



-------



$



$



--95,809



159,382

==========

==========

LIABILITIES

CURRENT

Accounts payable

64,047

Current portion of capital lease obligations (Note 5)

1,353

Royalties payable (Note 3)

3,537

Due to joint venture partner

14,658

Current portion of long term debt (Note 4)

15,121



$



9,663

5,373

30,702



-----------45,738

98,716

Long term debt (Note 4)

19,879

Capital lease obligations (Note 5)

5,213



$



-



-------



----------



-------



--45,738

123,808

----------



-------



--Contingency (Notes 1 and 10) and Commitments (Note 8)

SHAREHOLDERS' EQUITY

Share Capital (Note 6)

274,750

Deficit

(239,176)



276,750

(226,679)

----------



-------



--50,071

35,574

----------



-------



$



$



--95,809



159,382

==========

==========



Approved by

/s/ Timothy

/s/



James



the Board:

Stephens

Harvie



Director



-



Tim



Director



-



James



Stephens

Harvie



-42





ABACAN RESOURCE CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

1998

1997

---

REVENUE

Petroleum revenue (net of foreign taxes)

59,702

Royalties

(6,704)

Interest and other

528



----------



------











$



14,258



$



(1,994)

181

----------



------



---12,445

53,526

------------EXPENSES

Operating

46,276

General and administrative



17,431

4,623



------



3,934

Interest and other financial expense

4,333

Depletion, depreciation and amortization

28,159

Provision for decline in value of petroleum properties (Note 3)

210,000



3,022

4,244

----------



------



---29,320

292,702

----------



------



---LOSS BEFORE GAIN ON SALE OF ASSETS

(239,176)



(16,875)



GAIN ON SALE OF ASSETS (NOTE 1)

-



29,372

==========



==========

NET EARNINGS (LOSS) FOR THE YEAR (NOTE 7)

(239,176)



12,497



DEFICIT, BEGINNING OF YEAR

-



(239,176)

----------



------



---DEFICIT, END OF YEAR

$(239,176)



$(226,679)

==========



==========

BASIC EARNINGS (LOSS) PER SHARE

(2.13)



$



0.11



$



FULLY DILUTED EARNINGS (LOSS) PER SHARE

(2.13)





$



0.11



$



-43





ABACAN RESOURCE CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)







1998

--------



1997

---------



$ 12,497



$(239,176)



(29,372)

4,244

---------



210,000

28,159

----------



CASH PROVIDED BY (USED IN):

OPERATING ACTIVITIES

Net earnings (loss) for the year

Items not affecting cash:

Gain on sale of assets (Note 1)

Provision for decline in value of petroleum properties

Depletion, depreciation and amortization



Changes in non-cash working capital items



FINANCING ACTIVITIES

Issue of share capital

Exercise of options

Acquisition of petroleum and natural

gas properties

Acquisition of royalty interest

Long term debt

Bank debt

Capital lease obligations



INVESTING ACTIVITIES

Expenditures on petroleum and natural

gas properties

Disposition of assets (Note 1)

Changes in non-cash working

capital items

Other



(12,631)

22,123

--------9,492

---------



-



(1,017)

6,432

---------5,415

----------



1,624



2,000

(4,298)

(6,566)

--------(8,864)

---------



19,572

35,000

(20,100)

(35,342)

---------754

----------



(15,224)

86,392



(110,967)

-



(73,466)

3,162

--------864

---------



43,770

(1,204)

---------(68,401)

----------



INCREASE (DECREASE) IN CASH



1,492



(62,232)



CASH, BEGINNING OF YEAR



1,813



64,045



CASH, END OF YEAR



$ 3,305

=========



$

1,813

==========





-44

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

1.



BASIS



OF



PRESENTATION



Continuation



of



business



The consolidated financial statements have been presented using accounting

principles applicable to a going concern, which assumes that the Company will

continue operations in the foreseeable future and be able to realize assets and

satisfy liabilities in the normal course of business. The Company has a

liquidity problem which casts doubt upon the validity of this assumption.

The Company has incurred a net loss from operations of $16,875,000 for the year.

The cash flows from operations for the year amounted to a net outflow of cash of

$12,631,000. At December 31, 1998, the Company has a deficit of $226,679,000

and a net working capital deficiency of $42,402,000. Accounts payable and

royalties payable are past due in terms of normal payment terms and the long

term debt described in Note 4 is repayable as to $20,100,000 on June 30, 1999

and the remainder of $10,602,000 on December 31, 1999. As a result of the

disposition of the Company's interests as disclosed below, the Company no longer

has any revenue generating properties but is still incurring general and

administrative costs.



In addition, on June 30, 1998, the Company's wholly-owned subsidiary Liberty

Technical Services Ltd. ("Liberty") reached a settlement agreement with its

Nigerian partner, Amni International Petroleum Development Company Limited

("Amni"), regarding the Ima Field and Liberty's interest in Nigerian Concession

OML 112 (formerly OPL 469) and OPL 237. Under the agreement, Liberty

relinquished all rights and interests in the "shallow" zones of the Ima Field in

exchange for Amni (1) assuming all outstanding Ima Field related financial

claims (including trade creditor claims); (2) assuming responsibility for

ongoing and future lease obligations in respect of the Ima Field; and (3)

releasing Liberty from certain outstanding financial obligations under the terms

of joint venture agreements between Liberty and Amni. Although the Company

expects Amni will settle all the liabilities it has assumed, if Amni is unable

to settle all liabilities the Company may be held liable to settle the remaining

liabilities. Concurrent with its agreement with Amni, Liberty and Amni

exchanged their interest in the topside equipment of the mobile offshore

production unit with a major international service company in return for the

extinguishment of all outstanding debt due to that company. As a result, the

Company has severed its operational responsibilities and associated overhead

related to the Ima Field and removed $86,392,000 of liabilities from its balance

sheet.

The



details



of



the



assets



and



facilities



Petroleum and

Assumption of



natural gas properties

liabilities and obligations



Gain



of



on



sale



assets



disposed



of



are



as



follows:



$



57,020,000

(86,392,000)

==================

$

(29,372,000)

==================



-45

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

1.



BASIS



OF



PRESENTATION



-



CONTINUED



The Company's ability to continue as a going concern is dependent upon the

following factors which outline management's plan:

i)

the development of the natural gas reserves in the Benin Basin

Concessions OML113 (formerly OPL 309) and OPL 310 including the development of a

market for the produced natural gas in this area;

ii)

obtaining financing in the form of equity, debt or a combination thereof

in order to continue the development of the natural gas reserves in the above

mentioned Concessions.

iii)

negotiating a joint venture for the continued exploration and development

of the West African acreage position;

iv)

cash

time



continuing to finance general and administrative expenses from existing

or financing in the form of equity, debt or combination thereof until such

as the above negotiations and financing are complete.



v)

negotiations with certain

forbearance of the creditors;



suppliers



to settle current liabilities and



If the going concern assumption were not appropriate for these financial

statements, then adjustments would be necessary in the carrying value of assets

and liabilities, the reported net earnings (loss) and the balance sheet

classifications used.

Reporting



currency



The principal costs incurred in conducting the business operations of the

Company are almost exclusively transacted in U.S. dollars and revenues were

generated in that currency, therefore the Company has adopted U.S. dollars as

its reporting currency for financial presentation. All dollar amounts set forth

in these financial statements, including the notes thereto, are expressed in

U.S. dollars, except where indicated otherwise.

2.



SIGNIFICANT

Generally



ACCOUNTING



accepted



POLICIES



accounting



standards



These financial statements have been prepared in accordance with accounting

principles generally accepted in Canada which differ from accounting principles

generally accepted in the United States as described in Note 12.

-46

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

2.



SIGNIFICANT



ACCOUNTING



POLICIES



-



CONTINUED



Consolidation

These financial statements include the accounts of Abacan Resource Corporation,

a Canadian corporation incorporated in the Province of Alberta and its wholly

owned subsidiaries, ("the Company").

Revenue

ready



recognition



Revenue from crude

for shipment.

Petroleum



and



oil



natural



is

gas



recognized once it is produced and processed

properties



The Company follows the full cost method of accounting for petroleum and natural

gas properties whereby all costs of exploring for and developing petroleum and

natural gas reserves are capitalized on a country by country basis. Capitalized

costs included land acquisition costs, geological and geophysical costs, costs

of drilling wells, production equipment, related overhead costs, and capitalized

interest. As commercial production commenced in Nigeria effective January 1,

1997, the Company recorded depletion from that date and to the date of

disposition on June 30, 1998 on capitalized costs, excluding undeveloped

projects, using the unit of production method based upon estimated proved net

reserves as determined by the Company and reviewed yearly by independent

consulting engineers, converted to a common unit of measure using relative

energy content. The remaining full cost pool in Benin is not subject to

depletion until such time as its projects are developed and commercial

production has commenced.

The Company periodically performs an impairment test relative to the capitalized

cost of undeveloped properties. A ceiling test was employed at least annually

to ensure costs of developed properties accumulated by the Company do not exceed

estimated future cash flows from proven reserves and the cost of undeveloped

properties. For the purposes of this test, future cash flows are determined

using year-end prices and costs, including deductions for applicable overhead,

financing and income tax expenses.

All the Company's petroleum and natural gas exploration, development and

production activities are conducted jointly with others. These consolidated

financial statements reflect only the Company's proportionate interest in such

activities.

-47-





ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

2.



SIGNIFICANT

Foreign



ACCOUNTING



POLICIES



-



CONTINUED



Exchange



Foreign currency transactions and balances of the Company and its integrated

foreign subsidiaries are translated using the temporal method. Under this

method, monetary assets and liabilities are translated at year end rates, and

non-monetary assets and liabilities at rates prevailing at the transaction

dates. Expenses are translated at the average exchange rate for the month.

Foreign exchange gains or losses on long term monetary assets and liabilities

are deferred and amortized over the remaining term.

Estimates

The preparation of financial statements in conformity with generally accepted

accounting principles requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities at the date of the

financial statements and the reported amounts of revenues and expenses during

the reporting period. Actual results may differ from those estimates and

assumptions.

Earnings



per



share



The basic earnings per share has been calculated using the weighted average

number of shares outstanding during the year. Fully diluted earnings per share

are calculated taking into account all dilutive options.

3.



PETROLEUM



AND



NATURAL



GAS



PROPERTIES



As at January 1, 1998, the Company had working interests in seven concession

blocks in West Africa in two geologically distinct areas; the Niger Delta in

South Eastern Nigeria and the Benin Basin along the Nigeria/Republic of Benin

border. Five concessions are located in Nigeria and two are located in the

Republic of Benin.

In January 1998, the Company cancelled its joint venture agreement in respect of

the Nigerian Concession Block OPL 233, and consequently holds no interest in

this property.

As disclosed in Note 1, the Company has relinquished all its rights and

interests in the "shallow" zones of the Ima Field and its interests in the

Nigerian Concession OML 112 (formerly OPL 469) and OPL 237.

-48

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

3.



PETROLEUM



AND



NATURAL



GAS



PROPERTIES



-



CONTINUED



Costs accumulated to date for acquisitions, seismic, exploration and development

and production equipment net of depletion and provision for decline in value are

as follows:





1998

(000's)



1997

(000's)





Producing

Niger Delta

Concessions Blocks OML 112 (formerly OPL 469)

/OPL 237

Concession Block OPL 233

Less accumulated depletion

Less provision for decline in value



Non-producing

Benin Basin

Concession Block OPL 302

Less provision for decline in value

Concession Block OML 113 (formerly OPL 309)

Concession Block OPL 310

Benin Republic Blocks I & IV



-------



---------



$



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



$ 281,513

135

(28,022)

(206,019)

---------47,607

----------



81,285

6,024

5,010

--------



3,981

(3,981)

82,152

3,973

4,304

----------



92,319

Corporate assets



90,429



112

--------



435

----------



92,431

--------



90,864

----------



$ 92,431

========



$ 138,471

==========





As a result of the application of the ceiling test and other considerations

related to the Company's intention to sell its production assets, the Company

recorded a provision for decline in value of petroleum properties in 1997 of

$210,000,000.

Working



Interest



-



Nigerian



Concessions



While the "shallow" Ima Field encompassed all of the Company's production and

revenue streams, the Company retained a 10% working interest in the Ima "deep"

prospect which is currently undrilled. The Company continues to hold a working

interest in Nigerian Block OML 113 (formerly OPL 309) and OPL 310.

-49

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

3.

The



PETROLEUM

working



AND



interests



NATURAL



GAS



PROPERTIES



CONTINUED



of the Company in these two concessions are as follows:











Block OML 113



-



Before Payout

--------------Revenue

Cost

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



52.5%

100%



After Payout

--------------Revenue

Cost

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



26.7%

40%



Block OPL 310





48.5%



100%



24.7%



40%



The Company's Nigerian partner in Block OML 113 is Yinka Folawiyo Petroleum

Company ("YFP"), which is owned by the father of one of the directors of the

Company. That director is also an executive officer and director of YFP. YFP

is entitled to 15% of all revenues before payout and 28% after payout. YFP is

not responsible for any capital or operating costs until payout, at which time

it becomes responsible for 60% of the capital and operating costs. As a result

of the conversion of Concession Block OPL 309 to Concession Block OML113, the

Company has a commitment to YFP in the amount of $5,000,000, to be paid out of

net cash flow from the future production of Concession Block OML 113. All work

commitments under the original license with the Government of Nigeria related to

this Concession have been completed.

The Oil Prospecting License ("OPL") for Block 310 expired in February 1997,

however, the Nigerian Department of Petroleum Resources confirmed shortly

following the expiry of the OPL to the Company's Nigerian partner, Optimum

Petroleum Company Limited ("Optimum") that the OPL remained in good standing.

Subsequently, nothing has been received by the Company, or to the knowledge of

the Company, by Optimum that would indicate that the Nigerian authorities do not

consider OPL 310 to be valid and in good standing. The Company has an

obligation to pay $1,000,000 to Optimum within nine months of the testing of its

first exploration well and an additional $2,000,000 following commencement of

production. In addition, the Company is required under the OPL to drill three

wells and complete a seismic program on the Block. These minimum work

commitments do not become effective until the OPL is confirmed by the Nigerian

authorities. Despite this, Optimum has advised the Company that it wishes the

Company to proceed on the minimum work program in advance of the required

extension or renewal and receipt of requisite government approval to the joint

venture agreement.

Prior to June 30, 1998 the Company's economic participation in concession blocks

in Nigeria was calculated on a before and after payout basis and on a concession

by concession basis. Though royalties applicable to the Company's working

interest varied from concession to concession, general economic terms were as

follows:

-50

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

3.



PETROLEUM



AND



NATURAL



GAS



PROPERTIES



-



CONTINUED











Participation before

Royalties

Royalties

Net Concession

Participation





Before Payout

-----------------------Operating

Revenue

Cost

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



55%



100%



6.5% - 2.5%

48.5 - 52.5%



After Payout

-----------------------Operating

Revenue

Cost

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



28%



40%



3.3 - 1.6%

100%



24.7 - 26.4%



40%



Abacan International Resources Management Inc. ("AIRMI"), a company wholly owned

by a former president and director of the Company, holds royalty interest in



three of the Company's Nigerian concessions with rates ranging from 1.65% to

0.85% before payout and 0.82% to 0.42% after payout. The Company's interest in

the concessions exists through joint venture agreements between the Company's

subsidiaries and its Nigerian partner corporations.

At December 31, 1998, royalties payable included an amount of $1,059,000 (1997 $794,000) owed to AIRMI and $1,427,000 (1997 - $921,000) to YFP. The remaining

balance of royalties payable of $2,887,000 (1997 - $1,822,000) is due the

Company's other Nigerian partner corporations. All of the royalty payable

amounts are currently due and beyond normal repayment terms.

Working



Interests



-



Benin



Republic



Concessions



In July 1997, the Company increased its position in Benin Republic Blocks 1 and

4 to a 100% Participating Interest. Under separate production sharing contracts

with the Government of Benin, the Company is required to fund 100% of all

exploration and development costs of a prescribed minimum work program and is

entitled to receive approximately 69% of revenue from Block 1/Seme and 75% of

revenue from Block 4, subject to a sliding scale royalty that becomes applicable

after a prescribed level of cost recovery is achieved by the Company.

As part of the prescribed work program, the Company is required to drill one

well in Block 1/ Seme by February 1999 and one well in Block 4 by February 2002.

In addition, the Company is required to complete a seismic program on Block 4 by

February 2002. As the Company has not commenced the Block 1/Seme well, it will

at the end of February 1999 not be in compliance with the minimum work program.

As a result, under the production sharing contract, the Company's Participation

interest in-Block 1 would be subject to cancellation at that date. The Company

is in the process of negotiating an extension of this requirement.

-51

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

4.



LONG



TERM



DEBT



During 1997, the Company entered into a Crude Oil Prepayment Agreement in the

amount of $35,000,000 to be repaid out of a portion of the proceeds of future

crude oil deliveries from the Company's share of crude oil produced from the Ima

Field commencing in February, 1998. The original agreement specified that the

minimum amount by which the prepayment was to be repaid from the monthly

delivery payment of the marketer is $2,916,667 plus accrued interest at the

London Inter-Bank offered rate ("LIBOR") plus 2.5% during a six month grace

period, changing to LIBOR plus 0.5% beginning with the first principal

repayment. A portion of the proceeds from this loan was used to repay the

Company's bank indebtedness that existed at that time.

On June 30, 1998, concurrent with the settlement agreement disclosed in Note 1,

the prepayment sums of approximately $30,702,000 then outstanding under the

Crude Oil Prepayment Agreement were converted into a credit facility. Under the

terms of the facility, interest is payable on the outstanding principal balance

of the facility at a maximum rate equal to Libor plus 4% per annum. As

restructured, repayment of $20,100,000 was deferred until June 30, 1999 with the

balance of $10,602,000 due on December 31, 1999. Interest payments were to

commence quarterly on December 31, 1998. Subsequent to December 31, 1998, the

Company received written confirmation that the first quarterly interest payment

due December 31, 1998 had been capitalized and that interest payments would

commence on March 31, 1999. The Company has since been advised that

notwithstanding its written extension, the first interest instalment continued

to be due on December 31, 1998. The Company has not yet made this interest

payment and is currently negotiating regarding relief from this payment and from

other near-term cash interest payments.



The Company has granted security in respect of its repayment obligations under

the facility. Included as security are (1) a pledge of all of the common shares

of those subsidiaries that hold Participating Interests in the Company's Niger

Delta and Benin Basin Concessions; (2) a series of debentures granting a

security interest against the Company's Participating Interest in its Niger

Delta and Benin Basin Concessions; and (3) a guarantee of the Company for all

outstanding amounts under the Loan.

-52

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

5.



LEASE



OBLIGATIONS



The Company had entered into various leases relating to the production facility.

Leases are classified as capital or operating leases. Leases which transfer

substantially all of the benefits and risks incident to ownership of property

were accounted for as capital leases. All other leases were accounted for as

operating leases. As part of the restructuring and disposition of assets on

June 30, 1998 all lease obligations related to the production facility were

assumed by Amni.

The Company has entered into a lease for the office premises in Houston. The

lease has 18 months remaining. The minimum lease payments under the terms of

this lease are $41,200 per year.

6.



SHARE



CAPITAL



a)



Common Shares

Authorized

Unlimited number of

Issued

Common shares



common



shares and preferred shares issuable in series







Number of

$

Shares

(000's)

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





Balance, December 31, 1996

109,413,504 $ 253,554

- ---------------------------------------------- ----------- --------Issued on exercise of options

Issued on exercise of share

purchase warrants

Issued on acquisition of royalty interest

Balance, December 31, 1997

Issued on acquisition of petroleum and natural

gas properties

Balance, December 31, 1998



862,500



1,624



358,152

2,247,680

-----------



19,572

---------



112,881,836



274,750



1,489,000

-----------



2,000

---------



114,370,836

===========



$ 276,750

=========





-53

ABACAN RESOURCE CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

6.



SHARE

b)



CAPITAL

Stock



-



CONTINUED



Options



At December 31, 1998 the Company has options outstanding to acquire 12,356,200

common shares by officers, directors, consultants and employees of the Company.

These options may be exercised at prices ranging from CDN $0.28 to CDN $12.15

per common share and expire at various times to October 23, 2003.

c)



Warrants



Outstanding



On June 30, 1998, in connection with the restructuring of its loan, the Company

agreed to issue 600,000 options at a price of CDN$0.91 per share expiring June

30, 2000. At December 31, 1998, all of the options were outstanding.

On November 6, 1996 the Company completed a public issue of 12,500,000 common

shares at a price of $7.50 per common share. On November 19, 1996 an additional

1,875,000 common shares were issued in conjunction with the underwriters over

allotment option. The Company received net proceeds of $100,987,000. In

connection with this offering, the placement agent was granted warrants to

purchase 100,000 common shares of the Company. The warrants, which can be

exercised after one year from the issue date, have a term of five years and are

exercisable at a price of $7.50 per share. At December 31, 1998, all of these

warrants remain unexercised.

On April 19, 1996, there were warrants granted to purchase 500,000 Common Shares

of the Company for advisory services to an investment banker. These warrants

have a term of five years and are exercisable at a price of $3.40 per share. At

December 31, 1998, all of these warrants remain unexercised.

d)



Acquisition



of



Royalty



Interests



In February 1997, the Company acquired a portion of the gross overriding

royalties on Niger Delta Concession Block OML 112/OPL 237 from YFP by issuing

643,840 Common Shares valued at $6,036,000. The Company also acquired a portion

of the gross overriding royalties on Benin Basin Concession Block OML 113 from

YFP by issuing 643,840 Common Shares of the Company valued at $6,036,000.

On April 1, 1997, the Company acquired a further portion of the gross overriding

royalties on Concession Block OML 112/OPL 237 from YFP on Concession Block OML

113 by issuing 960,000 Common Shares valued at $7,500,000.

-54

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

6.



SHARE

e)



CAPITAL

Acquisition



-



CONTINUED

of



Participating



Interest



In April 1998, the Company issued 1,489,000 shares of its common stock to

Optimum in consideration for financial obligations of $2,000,000 owing to

Optimum to secure the Company's interest in Concession Block OPL 310. Optimum

is the indigenous Nigerian company which owns the rights to Concession Block OPL

310 and is partner to the Company in Concession Block OPL 310, as discussed in

Note 3.

7.

Due



INCOME

to



the



TAXES

nature of the Company's structure and operations, the Company will



not have a tax liability resulting from the current gain on the sale of assets

,and accordingly has not recorded a tax provision. At December 31, 1998, the

Company had approximately CDN $26,854,000 of non-capital losses available to be

applied against taxable income of the future years on the portion of its

operations which are subject to Canadian income taxes. These losses expire

between 1999 and 2004. The Company also had available for deduction, at rates

allowed under the Income Tax Act, CDN $17,012,000 of oil and gas expenditures.

The potential future benefit of these losses and deductions have not been

reflected in the consolidated financial statements.

8.



COMMITMENTS



The Company entered into an agreement for the sale of the Company's and its

Nigerian partner's entitlement to crude oil and condensate produced from the Ima

Field located in Concession Block OML 112 for a period of one year from the date

of the first lifting which occurred on February 21, 1997. The price payable for

each barrel of crude oil and condensate was based upon a range of quoted prices

for Bonny Quesbo crude oil less a new crude oil discount. This discount was

calculated based upon the volume of cargo lifted at each lifting.

At July 29, 1997, the Company entered into a second agreement for the sale of

the Company's entitlement to crude oil and condensate produced from the Ima

Field. The duration of this second agreement was to be one year commencing on

February 22, 1998.

-55

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

8.



COMMITMENTS



-



CONTINUED



Upon relinquishment by the Company of its participating interest in the Ima

Field at June 30, 1998, the above mentioned agreements were terminated, and the

loan was restructured as disclosed in Note 4.

The Company has further commitments with respect to its participating interests

in the Concessions, as disclosed in Note 3.

9.



FINANCIAL



INSTRUMENTS



The carrying value of the financial instruments of the Company approximates

their estimated fair value.

10.



CONTINGENCIES



While the Company is defending various lawsuits, there are two lawsuits in which

the claims are significant, which relate to liabilities assumed by Amni.

Although Amni has agreed to assume liability for any claims against the Company

in respect of oil and gas operations on the Ima Field, the Company will continue

to be liable to trade and other creditors until settlement arrangements can be

established. The total amounts claimed in the two lawsuits (exclusive of costs

and interest) is approximately $3,700,000. The management of the Company has

determined that the Company does not have any material exposure in any of the

lawsuits.

11.



UNCERTAINTY



DUE



TO



THE



YEAR



2000



ISSUE



The Year 2000 Issue arises because many computerized systems use two digits

rather than four to identify a year. Date-sensitive systems may recognize the

year 2000 as 1900 or some other date, resulting in errors when information using

year 2000 dates is processed. In addition, similar problems may arise in some

systems which use certain dates in 1999 to represent something other than a

date. The effects of the Year 2000 Issue may be experienced before, on, or after



January 1, 2000, and, if not addressed, the impact on operations and financial

reporting may range from minor errors to significant systems failure which could

affect the Company's ability to conduct normal business operations. It is not

possible to be certain that all aspects of the Year 2000 Issue affecting the

Company, including those related to the efforts of customers, suppliers, or

other third parties, will be fully resolved.

-56

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

12.



DIFFERENCES

CANADA AND



IN GENERALLY ACCEPTED

THE UNITED STATES



ACCOUNTING



PRINCIPLES



BETWEEN



The consolidated financial statements have been prepared in accordance with

generally accepted accounting principles (GAAP) in Canada. The primary

difference between Canadian and US GAAP affecting the Company's financial

statements are as discussed below:

Deferral



of



General



and



Administrative



Costs



Under Canadian GAAP, general and administrative costs, net of interest and other

revenue prior to the period in which commercial production commenced are

deferred and added to the carrying value of petroleum and natural gas

properties. Under US GAAP, deferral costs of this type would be treated as

expenses in the year incurred.

The effect of this difference is to create a statement of loss and deficit which

would include such revenues and expenses and to reduce the amounts included in

petroleum and natural gas properties as follows:







Net income (loss) as reported

Net oil production revenue

Interest revenue

General and administrative expense

Adjustment to provision for decline in value

of petroleum properties (US GAAP)

Adjustment to gain on sale of assets

Net earnings (loss)

Deficit, beginning of period

Deficit, end of period as adjusted

to US GAAP

Petroleum and natural gas properties

as reported

Increase (decrease)

As adjusted to US GAAP





1998

---------



1997

---------



1996

--------



$



$(239,176)

-



$



(715)

---------11,782



3,000

---------(236,176)



--------(253)



(238,461)

----------



(2,285)

----------



(2,032)

---------



$(226,679)

----------



$(238,461)

----------



$ (2,285)

---------



$



92,431

----------



$ 138,471

715

----------



$265,551

(2,285)

---------



$ 92,431

==========



$ 139,186

==========



$263,266

=========



12,497

-



1,300

1,050

(2,603)



-57

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

12.



DIFFERENCES

CANADA AND

Earnings



per



IN GENERALLY ACCEPTED ACCOUNTING

THE UNITED STATES - CONTINUED



PRINCIPLES



BETWEEN



share



The methodology for computing fully diluted earnings per share is not consistent

between the two countries. For Canadian purposes, the proceeds from dilutive

securities are used to reduce debt in the calculation. US GAAP, Statements of

Financial Accounting Standards ("SFAS") No. 128 requires the proceeds from

dilutive securities be used to repurchase common shares.

Statement



of



Changes



in



Cash



Flow



Under Canadian GAAP, certain financing and investing activities such as

acquiring petroleum and natural gas properties in exchange for share capital are

treated as a cash inflow followed by a cash outflow. As a result, these types

of transactions are included in the consolidated statements of cash flows.

Under US GAAP, non-cash transactions of a financing or investing nature are not

included in consolidated statements of cash flows. These types of transactions

are disclosed as supplementary disclosure to the consolidated statements of cash

flows. Accordingly for US GAAP purposes, financing and investing activities in

the statement of change in cash flow would be lower by $2,000,000, in 1998,

$19,572,000 in 1997 and $600,000 in 1996 as the Company had issued common

shares in exchange for petroleum and natural gas properties or royalty

interests.

For US GAAP purposes, the disposition of assets as outlined in Note 1 would not

be shown on the consolidated statements of cash flow as the Company did not

receive any cash as part of the transaction. Accordingly, cash flows from

financing activities are lower and investing activities will be higher by

$6,094,000.

In addition, for US GAAP purposes, changes in working capital are by definition

an operating activity. For Canadian GAAP purposes, change in working capital

that relate to investing activities such as purchases of equipment are treated

as an investing activity. Accordingly, the net cash from operations in the US

GAAP consolidated statements of cash flows would increase in 1998 by $9,994,000

(1997 - $43,770,000 and 1996 - $12,057,000) from the net cash from operations in

the Canadian GAAP consolidated statements of cash flows. Investing activities

are reduced by the identical amount in each year.

Foreign



currency



translation



Under Canadian GAAP, non-monetary assets and liabilities denominated in foreign

currencies are translated at exchange rates prevailing at the transaction dates.

Under US GAAP, those assets and liabilities would be translated at year-end

rates. As the majority of the assets and liabilities are denominated and

reported in US dollars, this difference would not have material effect on either

the financial position of the results of operations on the Company.

-58

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31

12.



DIFFERENCES

CANADA AND



IN GENERALLY ACCEPTED ACCOUNTING

THE UNITED STATES - CONTINUED



PRINCIPLES



BETWEEN



Deferred



income



taxes



Under Canadian GAAP, the Company would record a deferred tax asset related to a

tax loss carry forward only if the Company was virtually certain of realizing

the benefit associated with the tax loss carry forward. Under US GAAP, SFAS No.

109 requires that the Company record all deferred income tax assets and make an

estimate of the likely recoverability of the asset by recording a provision.

The provision would reduce the recorded deferred tax asset to the amount

expected to be recovered. The Company is of the opinion that the benefits

related to the tax loss carry forwards will not be realized for the foreseeable

future. Accordingly, the provision that the Company would record under US GAAP

would reduce the recorded deferred tax asset to a nil balance. As no benefit

has been realized for Canadian GAAP, there is no difference in the financial

position or the results of operations of the Company.

Comprehensive



income



SFAS No. 130 "Reporting Comprehensive Income" became effective as of the first

quarter of 1998. The statement requires companies to report and display

comprehensive income and its components. Comprehensive income includes all

changes in equity during a period except those resulting from investments by

shareholders or distributions to shareholders. For the Company, comprehensive

income is the same as net income reported in the consolidated statements of

operations and deficit, since there are no other items of comprehensive income

for the years presented.

Recently



issued



Accounting



Standards



SFAS 131, "Disclosures About Segments of an Enterprise and Related Information,"

is effective for the year ended December 31, 1998. This statement establishes

standards for defining and reporting business segments. As the financial

statements disclose the operations of the Company in the various countries, no

additional disclosure is needed.

SFAS 132, "Employer's Disclosures about Pensions and Other Post-retirement

Benefits," revises existing rules for disclosure of pensions and other

post-retirement benefit plans. As the Company does not have any pensions or

other post-retirement benefit plans, no additional disclosure is needed.

SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," is

effective for fiscal years beginning after June 15, 1999. This standard

requires that all derivatives be recognized as either assets or liabilities in

the balance sheet at their fair market values and that accounting for the

changes in their fair values is dependent upon the intended use of the

derivative and its resulting designation. The new standard will supersede or

amend existing standards which deal with hedge accounting and derivatives. The

Company has not yet determined the effect of adopting this standard will have on

its financial statements.

-59

The consolidated statements of operations and accumulated deficit and statements

of cash flows prepared using US GAAP are presented as supplemental information:





ABACAN RESOURCE CORPORATION

CONSOLIDATED STATEMENTS OF LOSS AND ACCUMULATED DEFICIT

(PREPARED USING U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES)

YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars - Note 1)

1998



1997



1996

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



-----------



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



Revenue

Petroleum revenue (net of royalties and foreign taxes)

52,998

$

1,300

Interest and other

528

1,050





$





12,264

181



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



$



-----------



-----------12,445



53,526



2,350

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



--



Expenses

Operating

46,276

General and administrative

3,934

2,603

Interest and other financial expense

4,333

Depletion, depreciation and amortization

28,159

Provision for decline in value of petroleum properties

207,000

-



17,431

4,623

3,022

4,244

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



--



-----------



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



-----------



-----------29,320



289,702



2,603

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



--



Net loss before gain on sale of assets

(236,176)

(253)



(16,875)



Gain on sale of assets

-



28,657

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



--



-----------



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



Net earnings (loss)

(236,176)

(253)



11,782



Deficit, beginning of period

(2,285)

(2,032)

--



-----------



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



(238,461)

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



-----------



$



$



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



Deficit, end of period

(238,461) $

(2,285)



(226,679)



=============

=============



============



Basic earnings (loss) per Common share

(2.11) $

0.00



$



0.10



$



=============

=============



============



Fully diluted earnings (loss) per common share

(2.11) $

0.00



$



0.10



=============

=============



============



Weighted average number of shares outstanding



113,942,486



$



112,029,272



92,899,595



=============





============



=============



-60





ABACAN RESOURCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(PREPARED USING U.S. GENERALLY ACCEPTED ACCOUNTING

PRINCIPLES)

YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars - Note 1)

1998



1997



1996

--



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







NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES

OPERATING

Net earnings (loss)

11,782

$(236,176) $

(253)

Items not affecting cash:

Gain on sale of assets

(28,657)

Provision for decline in value of petroleum properties

207,000

Depletion, depreciation and amortization

4,244

28,159

Changes in non-cash working capital items

32,117

50,202

12,057



$



-------19,486



---------49,185



---------11,804

--



-------



----------



----------



FINANCING

Issue of share capital

Common shares and warrants

104,449

Exercise of options

1,624

5,237

Long term debt

(4,298)

35,000

Bank debt

(20,100)

20,100

Capital lease obligations

(472)

(35,342)

41,909

Issue of convertible debentures

7,806

--------



----------



(4,770)



(18,818)



-------



----------



---------179,501

-----------



INVESTING

Expenditures on petroleum properties and equipment

(13,224)

(91,395)

(159,263)

Maturity settlement of short term investments

15,000

(15,000)

Other

(1,204)

(1,750)

--------



----------



(13,224)



----------



(77,599)



(176,013)

--



-------



----------



----------



NET CASH INFLOW (OUTFLOW)

1,492

(47,232)

15,292

CASH AND SHORT-TERM INVESTMENTS,

BEGINNING OF YEAR

1,813

49,045

33,753

--------



----------



----------



CASH AND SHORT-TERM INVESTMENTS,

END OF YEAR

3,305

$

1,813

$ 49,045

=========



==========



$



==========



Supplemental Non-Cash

Acquisition of petroleum and natural gas properties for common shares

$

2,000



$



19,572



$



600

--



-------



----------



----------



Supplemental Disclosure of Cash Flow

Interest paid

2663

$

2,833

$

895



$

--



------- ---------- ---------Operating lease payments

11,242

$ 23,940

$

-



$

--



------- ---------- ---------Conversion of convertible debentures

including accrued interest

$

$ 13,056



$

--



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




----------61-





ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

- -



SUPPLEMENTAL



Following



INFORMATION



is a summary of stock option activity during the years ended December



31,



1998,



1997



and



1996



(weighted



average



prices



are



in



$CDN):







-----1998-----



-----1997-----



-----1996----Weighted



Weighted



Average



Average



Weighted

Average

Number

Number



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





Outstanding at the beginning of the year

3.52



4,485,000



$



Number



Price



-----------



-----------



---------



-----------



--------



















10,461,750



$



4.72



6,768,000



5,710,250



0.93



4,946,250



(3,815,800)



9.81



(390,000)



-



-



(862,500)



-



-



6.55

5.00

2.26

-----------



---------



-----------



--------



12,356,200



$



10,461,750



$



===========



=========



---------



3.52



=========



=========



===========



Options exercisable

at the end of the year

4.39

4,407,000

$



9,764,117



===========

outstanding



$



3.63



===========



2.25



5,033,750



2.22

===========



Options



-



-



Outstanding at the

end of the year

4.72

6,768,000

$



=========





$



2.70



Granted

6.16

5,498,300

Terminated

5.12

(50,000)

Exercised

2.58 (3,165,300)

Expired

-



Price



Price



=========



===========



=========

as



of



December



31,



1998:











Exercise price of:

$0.28 - $1.00

$1.01 - $6.00

$6.01 - $12.15





Options

Outstanding

----------

4,710,000

7,293,900

352,500



Weighted

Average

Price

--------

$

$

$



0.44

3.65

12.15



Weighted

Average

Remaining

Life (yrs)

---------



Exercisable

Options

----------



4.62

2.97

3.09



4,710,000

4,877,867

176,250



-62

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Weighted

Average

Price

--------

$

$

$



0.44

3.65

12.15



$



FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

13.



SUPPLEMENTAL



INFORMATION



-



CONTINUED



In 1996, the United States Financial Accounting Standards Board issued Statement

of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based

Compensation." With regard to its stock option plan, the Company applies ABB

Opinion No. 25 as allowed under SFAS 123 in accounting for this plan and

accordingly no compensation cost has been recognized. Had compensation expense

been determined based on the fair value at the grant dates for the stock option

grants consistent with the method of SFAS No. 123, the Company's net income and

net income per common share should have been reduced to the pro forma amount

indicated below:





1998

1996



Net Income (Loss)

As Reported

(253)

Pro forma

(14,437)

Net Income (Loss) Per Share

As Reported

Basic

Fully Diluted

Pro forma

Basic

(0.16)

Fully Diluted

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







1997









11,782



(236,176)



8,510



(253,047)



0.10



(2.11)



0.10



0.07

0.07

-------



-



(2.26)

----------



--



Stock options issued during period (thousands)

5,710

4,946

5,498

Weighted average exercise price

$ 0.93 $

6.18

$

6.55

Average per option compensation value of options granted (a)

0.85

4.77

3.52

Compensation cost (thousands $U.S.)

$ 3,272 $ 16,871

$

14,184

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

(a) Calculated in accordance with the Black-Scholes option pricing model,

using the

following assumptions: expected volatility computed using, as of the date of

grant, the

prior year monthly average of the Common Shares as listed on the TSE, which ranged

from

53.5% to 148%; expected dividend yield - 0%; expected option term - 5 years; and

risk-free

rate of return as of the date of grant which ranged from 5.4% to 7.4%, based on the

yield of

five-year Canadian treasury securities.





-63

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

13.



SUPPLEMENTAL

Capitalized



INFORMATION



costs



-



CONTINUED



(unaudited)



The following tables summarize the costs incurred in oil and natural gas

property acquisition, exploration and development activities. Property

acquisition costs are those costs incurred to purchase, lease, or otherwise

acquire property. Exploration costs include costs of identifying areas that may

warrant examination and in examining specific areas that are considered to have

prospects containing oil and natural gas reserves, including costs of drilling

exploratory wells, geological and geophysical costs and carrying costs on

undeveloped properties. Development costs are incurred to obtain access to

proved reserves, including the cost of drilling development wells, and to

provide facilities for extracting, treating, gathering and storing the oil and

natural gas.

The Company has

costs pertaining



capitalized property acquisition, exploration and development

to its oil and gas producing operations as follows:







1998







Property

Proved

Unproved



1997



$



92,431

-------







1996





$ 279,859

94,535

----------



$203,013

60,253

--------



92,431

Accumulated depreciation,

depletion and amortization

Capitalized Costs



374,394



263,266



-------



(235,208)

----------



--------



$92,431

=======



$ 139,186

==========



263,266

========





-64

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

13.



SUPPLEMENTAL



INFORMATION



Costs incurred for

calendar year basis



-



property







Total

(000's)



CONTINUED

acquisition and exploration activities on a











1998

Property Acquisition

Proved

Unproved

Exploration and Development



$



2,000

13,224

--------$ 15,224

---------



1997

Property Acquisition

Proved

Unproved

Exploration and Development



$



20,772

1,525

88,670

--------$ 110,967

---------



1996

Property Acquisition

Proved

Unproved

Exploration and Development



$



600

159,249

--------159,849

---------





Depletion

The



Expenses



Company



has



(unaudited)

recorded



depletion



1998

$ 2.92

=======



on



1997

$

8.33

========



a



per



barrel



basis



as



follows:



1996

$

=======



-65

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

14.



SUPPLEMENTAL



RESERVE



INFORMATION



(UNAUDITED)



Net proved oil and natural gas reserve estimates were prepared by Gilbert

Lausten Jung Associates Ltd., independent petroleum engineers located in

Calgary, Alberta. Oil and natural gas prices in effect as of the reserve report

date were used without escalation. Operating costs and future development costs

were based on current costs with no escalation.

There are numerous uncertainties inherent in estimating quantities of proved

reserves and in projecting future rates of production and the timing of

development expenditures. The following reserve data represents estimates only

and should not be construed as being exact. Moreover, the present values should

not be construed as the market value of the Company's oil and natural gas

reserves or the costs that would be incurred to obtain equivalent reserves.







Estimated quantities of proved reserves

(mmbbls)



Year ended

December 31,

1998

-----------



Year ended

December 31,

1997

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



Year ended

December 31,

1996

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



Balance, beginning of year

Reserve additions

Economic revisions

Production and sale



15.8

15.8

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



23.5

(4.3)

(3.4)

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



21.8

1.8

(0.1)

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



Balance, end of year



============



15.8

=============



23.5

=============









Standardized

gas reserve



measure of discounted future cash flows relating to proved oil and

quantities



In calculating the standardized measure of discounted future net cash flows,

prices and costs in effect at year end were assumed to be constant, were applied

to proved reserves and provision was made for estimated future development

expenditures that will be required to produce the Company's reserves. Royalty

deductions were based on laws, regulations and contracts existing at the end of

the fiscal year. The discounted future net cash flows were derived by applying

a 10% discount factor, as required by SFAS No. 69, to the future net cash flows.

Management believes that this information does not reflect the current economic

value of the oil and gas properties or the present value of estimated future

cash flows since no economic value is attributed to potential reserves, the use

of a 10% discount rate is arbitrary and prices change constantly from year end

levels.

-66

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

14.



SUPPLEMENTAL



RESERVE



INFORMATION



(UNAUDITED)



-



CONTINUED









December 31, 1998

Future cash inflows

Future capital lease payments

Future gross overriding royalties

Future production and development costs



(000's)



$



--------



10% annual discount for estimated timing of cash flows



--------



Standardized measure of future net cash flows



$

========



Changes in standardized measure



December 31, 1997

Purchases of reserves in place

Sales of reserves in place

Net changes in prices and costs



$



64.5

(64.5)

--------



December 31, 1998



$

========



December 31, 1997

Future cash inflows

Future capital lease payments

Future gross overriding royalties

Future production and development costs



$ 357.8

6.6

(35.8)

(251.5)

-------77.1



10% annual discount for estimated timing of cash flows



(12.6)

--------



Standardized measure of future net cash flows



$ 64.5

========



Changes in standardized measure

December 31, 1996

Purchases of reserves in place

Production

Net changes in prices and costs



$ 268.2

(203.6)

(.01)

--------



December 31, 1997



$ 64.5

========





-67

ABACAN RESOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31

(Thousands of U.S. Dollars)

(Note 1)

14.



SUPPLEMENTAL



RESERVE



INFORMATION



(UNAUDITED)



-



CONTINUED









December 31, 1996

Future cash inflows

Future capital lease payments

Future gross overriding royalties

Future production and development costs



(000's)

-------

$ 537.4

38.1

(55.8)

(217.4)

-------302.3



10% annual discount for estimated timing of cash flows



(34.1)

--------



Standardized measure of future net cash flows



$ 268.2



========

Changes in standard measure

December 31, 1995

Purchases of reserves in place

Sales of reserves in place

Net changes in prices and costs



$ 152.0

116.2

--------



December 31, 1996



$ 268.2

========





U.S.



GAAP



RECONCILIATION



The Company's Audited Consolidated Financial Statements for the fiscal year

ended December 31, 1998 (the "1998 Financial Statements") have been prepared in

accordance with generally accepted accounting principles in Canada. These

principles differ in some respects to generally accepted accounting principles

in the United States. The Company's 1998 Financial Statements include "Comments

by Auditors for U.S. Readers on Canada - U.S. Reporting Difference" as a

supplement to the Auditors' Report. In addition, a detailed discussion entitled

"Differences in Generally Accepted Accounting Principles Between Canada and the

United States" is included as Note 12 of the 1998 Financial Statements. See

"Consolidated Financial Statements and Unaudited Supplementary Data".

-68

ABACAN RESOURCE CORPORATION

INDEPENDENT AUDITOR'S CONSENT



We consent to the inclusion of our report dated February 17, 1999 (which express

an unqualified opinion and for U.S. Readers had a Canada-U.S. reporting

difference which would require the addition of an explanatory paragraph

(following the opinion paragraph) relating to the Company's ability to continue

as a going concern), with respect to the consolidated financial statements of

Abacan Resource Corporation appearing in the Annual Report on Form 10-KSB of

Abacan Resource Corporation for the year ended December 31, 1998.



Deloitte



&



Touche



LLP



/s/ Deloitte & Touche

Chartered Accountants

Calgary, Alberta

March



26,



LLP



1999

-69-







-70



-71



ITEM



8.



CHANGES IN AND DISAGREEMENTS

FINANCIAL DISCLOSURE



WITH ACCOUNTANTS ON ACCOUNTING AND



There are not and have not been any disagreements between the Company and

its accountants on any matter of accounting principles or practices or financial

statement disclosure.

PART III

ITEM



9.



DIRECTORS



DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE

ISSUER; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

AND



EXECUTIVE



OFFICERS



The following is a list of the names of the Company's current directors and

executive officers, their jurisdiction of residence and their principal

occupation for the past five years. Each of the named directors has agreed to

stand for re-election at the upcoming Annual and Special Meeting of Shareholders

scheduled for March 29, 1999 in Houston, Texas.





NAME

AGE

POSITION

PRINCIPAL

OCCUPATION WITHIN LAST FIVE YEARS

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





Timothy T. Stephens

46 Chairman, President, CEO President, Chief Executive

Officer and Director since February 1998 and

Houston, Texas

and Director

Chairman since February 1999;

prior thereto, between March 1995 and

May 1997, the President and a

Director of Seven Seas Petroleums Inc.

(TSE and NASDAQ); prior

thereto, between July 1991 and March 1995,

a Vice President of Enron

Capital and Trade Resources Inc.

James S. Harvie (1)

49 Director

Chief Operating Officer between June 1997

Calgary, Alberta

thereto, between June 1994 and August 1996,



Director since June 1997 and

and February 1999; prior

the Executive Vice President



of Midland Walwyn Capital Inc.; prior

thereto, President of Deacon

Barclay's Canada; former Governor of The

Toronto Stock Exchange.

T. B. ("Tunde") Folawiyo

39 Director

Executive Director of Yinka Folawiyo

Lagos, Nigeria

Nigerian oil company) and Executive



Director since December 1993.

Petroleum Co. Ltd. (a private

Director of Yinka Folawiyo



Group of Companies (an international business

conglomerate).

James A. Kishpaugh (1)

58 Director

1999. Chairman and CEO of Merlon Petroleum

Houston, Texas

since 1997. Chairman and CEO of Texas



Director since February 8,

Company, a private company,

International Company (NYSE)



and Phoenix Resources Company

(NASDAQ) from 1978 to 1990.

Kenneth C. Rutherford (1)



45



Director



Director since February 8,



1999. Vice President and CFO of Scorpion

Calgary, Alberta

1998 to present; President of Captiva



Energy Corporation (TSE) from

Resource Corporation, a



private oil and gas financial, investment and

administrative services

company, from 1993 to present; Vice President

Finance and CFO of Arakis

Energy Corporation (NASDAQ) from

December 1996 to September

1997 and a Director of Arakis from

July 1997 to October 1998.



_________

(1)

Indicates





member



of



the



Company's



Audit



Committee.



During the fiscal year ended December 31, 1998, the Corporation paid no

cash compensation (including salaries, director's fees, commissions, bonuses

paid for services rendered, bonuses paid for services rendered in a previous

year, and any compensation other than bonuses earned by the directors for

services rendered) to the directors for services rendered as such. Compensation

has been paid by the Corporation to certain directors or companies owned or

controlled by directors where such directors have provided ongoing professional

consulting or employment services to the Corporation or its subsidiaries.

Executive officers of the Corporation who also act as directors of the

Corporation, do not receive any additional compensation for services rendered in

their capacity as directors, other than as paid by the Corporation to such

executive officers in their capacity as executive officers.

-72

During the fiscal year ended December 31, 1998, a total of 4,999,500 stock

options were granted to the directors of the Corporation (including directors

who were executive officers).

SIGNIFICANT



EMPLOYEES



The following persons, who are not directors or executive officers of the

Company, are expected to make a significant contribution to the ongoing business

affairs of the Company.





NAME

AGE

POSITION

PRINCIPAL OCCUPATION WITHIN LAST FIVE

YEARS

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





Wade G. Cherwayko

35 Consultant Consultant to the Company since February 1998;

President and Chief

Lagos, Nigeria

Executive Officer of the Corporation between May

1993 and February

1998; Director between November 1992 and February

1999; prior thereto,

an independent international petroleum consultant.



FAMILY



RELATIONSHIPS



There are no family

executive officers.

INVOLVEMENT



IN



CERTAIN



relationships



LEGAL



PROCEEDINGS



among



the



Company's



directors



or



None of the Company's directors or executive officers have been involved

during the past five years in any legal proceedings material to an evaluation of

such persons ability or integrity.

COMPLIANCE



WITH



SECTION



16(A)



OF



THE



EXCHANGE



ACT



Section 16(a) of the Securities Exchange Act of 1934 requires the Company's

officers and directors, and persons who own more than 10 percent of the

Company's common stock to file reports of ownership and changes in ownership

with the Securities and Exchange Commission ("SEC"). Officers, directors, and

greater than 10 percent shareholders are required by SEC regulations to furnish

the Company with copies of all Section 16(a) forms they file. Management

believes all such individuals were in compliance with Section 16(a) as of the

effective date hereof.

ITEM



10.



EXECUTIVE



COMPENSATION



Information in respect of this item appears on Pages 6 - 14 of the

Company's Definitive Proxy Statement filed March 5, 1999 under the heading

"Compensation of Directors and Executive Officers" and is incorporated herein by

reference.

ITEM



11.



SECURITY



OWNERSHIP



OF



CERTAIN



BENEFICIAL OWNERS AND MANAGEMENT



Information in respect of this item appears on Pages 2 - 5 of the Company's

Definitive Proxy Statement filed March 5, 1999 under the heading "Voting Shares

and Principal Holders Thereof" and is incorporated herein by reference.

-73

ITEM 12.



CERTAIN



RELATIONSHIPS



AND



RELATED



TRANSACTIONS



There are no material interests, direct or indirect, of directors, senior

officers, or any shareholder who beneficially owns, directly or indirectly, more

than 5% of the outstanding Common Shares or any known associate or affiliates of

such persons, in any transaction within the last two fiscal years or in any

proposed transaction which has materially affected or would materially affect

the Company other than as disclosed below:

TRANSACTIONS

(1)

On April 5, 1995, Liberty Technical Services Ltd. ("Liberty") (a

subsidiary of the Company) granted Yinka Folawiyo Petroleum Company Limited

("YFP") a 2.40879% before Payout (1.26% after Payout) royalty interest in

respect of all petroleum substances produced from Concession Block OPL 237 in

consideration of YFP's assistance in enabling the Company to acquire a

Participating Interest in the concession. On March 31, 1997, YFP sold 0.9554%

before Payout and 0.4863% after Payout of its royalty interest to Liberty in

consideration of the payment of $3,767,495 from Liberty to YFP. The

consideration for the purchased royalty interest was based upon the discounted

future value of the royalty interest based upon the proved reserves on

Concession Block OPL 237 at the time of purchase. The purchase price was

determined based upon the purchase price paid by the Company for a royalty

interest acquired by it from an unrelated third party. Payment was satisfied

through the issuance of 482,239 common shares of Abacan at a price of $7.8125

per common share. YFP is a company that is substantially controlled by the

father of Mr. Tunde Folawiyo, a director of the Company. Tunde Folawiyo is a

director and senior officer of YFP.

(2)

On February 23, 1994, Liberty granted YFP a 2.45775% before Payout

(1.2611% after Payout) royalty interest in respect of all petroleum substances

produced from Concession Block OML 112 (formerly OPL 469) in consideration of

YFP's assistance in enabling the Company to acquire a Participating Interest in

the concession. On March 31, 1997, YFP sold 0.86125% before Payout and 0.43841%

after Payout of its royalty interest to Liberty in consideration of the payment



of $3,732,505 from Liberty to YFP. The consideration for the purchased royalty

interest was based upon the discounted future value of the royalty interest

based upon the proved reserves on Concession Block OPL 469 at the time of

purchase. The purchase price was determined based upon the purchase price paid

by the Company for a royalty interest acquired by it from an unrelated third

party. Payment was satisfied through the issuance of 477,761 common shares of

Abacan at a price of $7.8125 per common share.

(3)

On March 8, 1992, the Company and YFP signed a Joint Venture Agreement

for the exploration of Nigerian Concession Block OPL 309. Under the terms of

the Joint Venture Agreement, the Company was responsible, inter alia, to pay YFP

a conversion fee of $5.0 million upon the conversion of the OPL into an OML. On

July 3, 1998, OPL 309 was converted into OML 113. Consequently, a payment of

$5.0 million is due from the Company to YFP. Payment of this amount will come

from a portion of the Company's net cash flow from future production on OML 113.

MATERIAL



INTERESTS



1.

Pursuant to a Royalty Agreement between Liberty and Abacan International

Resource Management Inc. ("AIRMI") dated December 2, 1994, AIRMI holds a 1.501%

Pre-Payout (0.764% After Payout) royalty interest in respect of all petroleum

substances produced from Concession Block OPL 237. AIRMI is a company wholly

owned by Wade G. Cherwayko, a former President, CEO and director of Abacan.

-74

2.

Pursuant to a Royalty Agreement between Liberty and AIRMI dated August

19, 1993, AIRMI holds a 0.825% before Payout (0.42% after Payout) royalty

interest in respect of all petroleum substances produced from Concession Block

OML 112.

3.

Pursuant to a Royalty Agreement between Liberty and AIRMI dated March 8,

1992, AIRMI holds a 1.65% before Payout (0.84% after Payout) royalty interest in

respect of all petroleum substances produced from Concession Block OML 113.

4.

Pursuant to a Participation/Royalty Agreement between Liberty and YFP

dated April 5, 1995 (amended pursuant to a Sale Agreement dated March 31, 1997),

YFP holds a 1.61146% before Payout (0.82037% after Payout) royalty interest in

respect of all petroleum substances produced from Concession Block OML 112.

5.

Pursuant to a Participation/Royalty Agreement between Liberty and YFP

dated February 23, 1994 (amended pursuant to a Sale Agreement dated March 31,

1997), YFP holds a 1.59650% before Payout (0.81269% after Payout) royalty

interest in respect of all petroleum substances produced from Concession Block

OML 112.

6.

YFP is the indigenous Nigerian concession owner of Concession Block OML

113. Under the terms of the Joint Venture Agreement between the Company and YFP

dated March 8, 1992, the Company is responsible for paying 100% of all capital

and operating costs before to Payout reducing to 40% of all such costs after

Payout. After accounting for royalties and taxes, the Company is entitled to

52.525% of all revenues earned before Payout and 26.74% of all revenues after

Payout. YFP is not responsible for any costs before Payout but is entitled to

15.0% of all revenues before Payout. After Payout, YFP is responsible for 60% of

all capital and operating costs and is entitled 28.0% of all revenues. In

addition to the foregoing, the Company is responsible for a payment of $5.0

million to YFP as a result of the conversion of the oil prospecting licence to

an oil mining lease in respect of Block OML 113. Payments are to be paid out of

a portion of the Company's net cash flow from future production of Block OML

113.

ITEM

(3)



13.



EXHIBITS



Exhibits:



See



AND



REPORTS



the



Exhibits



ON



FORM



Index



8-KSB

on



Page



77.



(4)

last



Reports on Form

quarter of fiscal



8-KSB: No reports on Form 8-KSB were filed during the

1998.

-75-





SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the

Securities Exchange Act of 1934, the Registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly

authorized, on March 1, 1999.

ABACAN RESOURCE

(Registrant)



CORPORATION



By: /s/ Timothy T. Stephens

______________________________

Timothy T. Stephens

Chairman of the Board , President and

Chief Executive Officer

(Principal Executive

Officer)

By: /s/ James S. Harvie

______________________________

James S. Harvie

Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this

report has been signed below by the following persons in the capacities and on

the dates indicated:





Signature





Title





Date





/s/ Timothy T. Stephens

Timothy T. Stephens



Chairman of the Board, President,

Chief Executive Officer and Director



March 1, 1999



/s/ James S. Harvie

James S. Harvie



Director



March 1, 1999



/s/ James Kishpaugh

James Kishpaugh



Director



March 1, 1999



/s/ Ken Rutherford

Ken Rutherford



Director



March 1, 1999



/s/ Tunde Folawiyo

Tunde Folawiyo





Director



March 1, 1999



-76





ABACAN RESOURCE CORPORATION

EXHIBITS INDEX

Exhibit

Number

- -------



Description

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



------







3.1



Certificate of Amendment and Articles of Amalgamation dated February 10, 1995



3.2



Articles of Amendment dated June 20, 1997



3.3



By-Laws dated January 20, 1995



4.1



Description of Common Stock



10.1



Termination, Settlement and Release Agreement dated June 30, 1998 between Amni

and Liberty, and first supplement agreement



10.2



Termination, Settlement and Release Supplemental Agreement dated June 30, 1998

between Amni and Liberty



10.3

Joint Venture Agreement dated June 30, 1998 in respect of the Deep Ima

Prospect

between Amni and Liberty

10.4

Joint Operating Agreement dated June 30, 1998 in respect of the Deep Ima

Prospect

between Amni and Liberty

10.5



Debenture dated June 30, 1998 in respect of the Deep Ima Prospect between Amni

and Liberty



10.6



Consent Agreement dated June 30, 1998 between Amni and Liberty



10.7



Termination Agreement dated June 30, 1998 in respect of the MOPU between

Abacan Technical Services Ltd. ("Abacan Technical"), Liberty, Amni,

Schlumberger and Sedco



10.8



Facility Agreement dated June 30, 1998 between Abacan Resource

Corporation ("Abacan"), Dahomey Resource Corporation ("Dahomey"), Liberty and



CSFB

10.9



Security Trust Deed dated June 30, 1998 between Abacan, Dahomey, Liberty,

Abacan Resources (Benin) Limited ("Abacan Benin"), West African Resource

Corporation, Agbara Resources Limited, Abacan Power (Benin) Limited, AbacanAddax Benin Consortium S.A., Abacan Resources (Nigeria) Ltd., Angus

International Resources Ltd., Profile International Ltd. and CSFB



10.10



Royalty Agreement dated March 8, 1992 in respect of Nigerian Concession Block

OML 113 (formerly OPL 309) between Liberty and Abacan

International Resource Management Inc. ("Airmi")



10.11



Royalty/Revenue Interest Sale Agreement dated March 31, 1997 in respect

of Nigerian Block OML 112 (formerly OPL 469) between Liberty and Yinka

Folawiyo Petroleum Company Limited ("YFP")

-77-





10.12



Royalty Agreement dated August 19, 1993 in respect of Nigerian Concession

Block OML 112 (formerly OPL 469) between Liberty and Airmi



10.13



Royalty/Revenue Interest Sale Agreement dated March 31, 1997 in respect

of Nigerian Block OPL 237 between Liberty and YFP



10.14



Royalty Agreement dated December 2, 1994 in respect of Nigerian

Concession Block OPL 237 between Liberty and Airmi



10.15



Joint Operating Agreement dated March 8, 1992 in respect of Nigerian

Concession Block OML 113 between Liberty and YFP



10.16



Joint Operating Agreement dated March 8, 1992 in respect of Nigerian

Concession Block OML 113 between Liberty and YFP



10.17



Project Management Agreement dated March 8, 1992 in respect of

Nigerian Concession Block OML 113 between Liberty, YFP and Airmi



10.18



Technical Assistance Agreement dated March 8, 1992 in respect of

Nigerian Concession Block OML 113 between Liberty and YFP



10.19



Joint Venture Agreement dated November 27, 1996 in respect of

Nigerian Concession Block OPL 310 between Liberty and Optimum Petroleum

Development Limited ("Optimum")



10.20



Technical Assistance Agreement dated November 27, 1996 in respect of

Nigerian Concession Block OPL 310 between Liberty and Optimum



10.21



[intentionally left blank]



10.22

Oil Exploration and Exploitation Contract - Offshore Block No. 4 dated

February

1, 1997 between Addax Petroleum Benin Limited ("Addax"), Abacan Resources

(Benin) Limited and the Government of the Republic of Benin (English language

translation of French language original).

10.23



Oil Exploration and Exploitation Contract - Offshore No. 1 and Seme Bloc dated

February 1, 1997 between Addax Petroleum Benin Limited ("Addax"), Abacan

Resources (Benin) Limited and the Government of the Republic of Benin (English

language translation of French language original).



10.24



Purchase and Sale Agreement dated July 31, 1997 in respect of Benin Block 4

and Block 1 between Addax and Abacan Benin



10.25



Conveyance Agreement dated July 31, 1997 in respect of Benin Block 4 and

Block 1 between Addax and Abacan Benin

-78-





10.26



Consulting Services Agreement dated July 18, 1996 between Texada Holdings

Ltd. and Liberty



10.27



Employment Services Agreement dated February 10, 1998 between

Timothy Stephens and Abacan



10.28



Stock Option Plan dated June 20, 1997 and standard form of Stock

Option Agreement



11.1



Statement re: Computation of Per Share Earnings



21.1



Subsidiaries



27.1

Summary Financial Information



-79







EX-3.1

2





EXHIBIT



3.1

CORPORATE ACCESS NUMBER

20641637



BUSINESS CORPORATIONS ACT



CERTIFICATE

OF

AMALGAMATION



ABACAN RESOURCE CORPORATION

IS THE RESULT OF AN AMALGAMATION

ON FEBRUARY 10, 1995



MUNICIPAL



FILED



AFFAIRS



SEAL



/S/

--------------------------REGISTRAR OF CORPORATIONS



GOVERNMENT



OF



ALBERTA





ARTICLES



BUSINESS CORPORATIONS

(SECTION 179)

ALBERTA

CONSUMER

1.



AND



NAME



CORPORATE

OF



ABACAN



AFFAIRS



AMALGAMATED

RESOURCE



ARTICLES



OF



ACT



OF



AMALGAMATION

PAGE 1



FORM



9



AMALGAMATION



CORPORATION:



CORPORATION



- -------------------------------------------------------------------------------2.



CORPORATE



ACCESS



NO.:



20641637

- -------------------------------------------------------------------------------3.



THE CLASSES AND ANY

AUTHORIZED TO ISSUE:



MAXIMUM



NUMBER OF SHARES THAT THE CORPORATION IS



THE ATTACHED SCHEDULE 1 IS INCORPORATED INTO AND FORMS PART OF THIS FORM.

- -------------------------------------------------------------------------------4.



RESTRICTIONS



IF



ANY



ON



SHARE



TRANSFERS:



NONE

- -------------------------------------------------------------------------------5.



NUMBER

MINIMUM



(OR



MINIMUM



AND



1,



MAXIMUM



15



MAXIMUM



NUMBER)



OF



DIRECTORS:



- -------------------------------------------------------------------------------6.



RESTRICTIONS



IF



ANY



ON



BUSINESS



THE



CORPORATION



MAY



CARRY



ON:



NONE

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

ARTICLES

7.



OTHER



PROVISIONS,



IF



OF



AMALGAMATION

PAGE 2



ANY:



THE BOARD OF DIRECTORS OF THE CORPORATION MAY, BETWEEN ANNUAL MEETINGS APPOINT

ONE OR MORE ADDITIONAL DIRECTORS OF THE CORPORATION TO SERVE UNTIL THE NEXT

ANNUAL MEETING, BUT THE NUMBER OF ADDITIONAL DIRECTORS SHALL NOT AT ANY TIME

EXCEED ONE-THIRD (1/3) OF THE NUMBER OF DIRECTORS WHO HELD OFFICE AT THE

EXPIRATION OF THE LAST ANNUAL MEETING OF THE CORPORATION.

- -------------------------------------------------------------------------------8.



NAME



OF



ABACAN

CANADIAN

CANSTAR

CANADIAN

PROFILE



AMALGAMATING

RESOURCE

ANGUS

VENTURES



CORPORATE



CORPORATION

RESOURCES



ACCESS



NO.:



20482411



LTD.



20389539



CORP.



INDUSTRIAL

CAPITAL



CORPORATIONS:



20359023



MINERALS



CORP.



CORP.



20638943

20368302



- -------------------------------------------------------------------------------9.



DATE



FEBRUARY



10,



SIGNATURE



1995



/s/



Wade



TITLE



Cherwayko



Director



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



FOR



DEPARTMENTAL



USE



ONLY



FILED





ARTICLES



OF



AMALGAMATION

PAGE 3



SCHEDULE "1"

-----------The



shares



(a)



an unlimited number of common shares without nominal or par value with the

following rights, privileges, restrictions and conditions:

(i)



which



the



Corporation



is



authorized



to



issue



are:



to vote at meetings of shareholders, except meetings at which only

holders of a specified class of shares are entitled to vote;



(ii) subject to the rights, privileges,

restrictions and conditions

attaching to any other class of shares of the Corporation, to share

equally in the remaining property of the Corporation upon liquidation,

dissolution or winding-up of the Corporation; and

(iii)subject to the rights of the preferred shares, the common shares shall

be entitled to receive dividends if, as and when declared by the

directors of the Corporation; and

(b)



an unlimited number of preferred shares without nominal

("Preferred

Shares") which, as a class, have attached

following:

(i)



or par value

thereto the



the Preferred Shares may from time to time be issued in one or more

series and, subject to the following provisions, to the sending of

articles of amendment in prescribed form and the issuance of a

certificate of amendment in respect thereof, the directors may fix

from time to time before such issue the number of shares which is to

comprise each series and the designation,

rights,

privileges,

restrictions and conditions attaching to each series of preferred

shares including, without limiting the generality of the foregoing,

the rate or amount of dividends or the method of calculating

dividends, the dates of payment thereof, the redemption, purchase

and/or conversion prices and terms and conditions of redemption,

purchase and/or conversion, and any sinking fund or other provisions;





ARTICLES



OF



AMALGAMATION

PAGE 4



(ii) the Preferred Shares of each series shall, with respect to the payment

of dividends and the distribution of assets or return of capital in

the event of

liquidation,

dissolution

or

winding-up of the

Corporation, whether voluntary or involuntary, or any other return of

capital or distribution of the assets of the Corporation among its

shareholders for the purpose of winding up its affairs, rank on a

parity with the preferred shares of every other series and be entitled

to preference over the common shares and over any other shares of the

Corporation ranking junior to the preferred shares. The Preferred



Shares of any series may also be given such other preferences, not

inconsistent with these articles, over the common shares and any other

shares of the Corporation ranking junior to such preferred shares as

may be fixed in accordance with clause (b) (i);

(iii)if any cumulative dividends or amounts payable on the return of

capital in respect of a series of Preferred Shares are not paid in

full, all series of Preferred Shares shall participate rateably in

respect of accumulated dividends and return of capital; and

(iv) unless the directors otherwise determine in the articles of amendment

designating a series, the holder of each share of a series of

Preferred Shares shall not, except as otherwise specifically provided

in the Business Corporations Act (Alberta), be entitled to receive

--------------------------notice of or vote at any meeting of shareholders.









EX-3.2

3



EXHIBIT



3.2

CORPORATE ACCESS NUMBER: 206416372



ALBERTA

BUSINESS CORPORATIONS ACT

CERTIFICATE

OF

AMENDMENT

ABACAN RESOURCE CORPORATION

AMENDED ITS ARTICLES ON 1998/05/27



REGISTRAR OF

Seal

CORPORATIONS



BUSINESS CORPORATIONS ACT FORM 4

(SECTION 27 OR 171)



ALBERTA

CONSUMER AND CORPORATE AFFAIRS ARTICLES OF AMENDMENT

- -------------------------------------------------------------------------------1.NAME OF CORPORATION:



2.CORPORATE ACCESS NUMBER:



ABACAN RESOURCE CORPORATION206416372

- -------------------------------------------------------------------------------3.Pursuant to subsection 167(1)(m) of the Business Corporations Act (Alberta),

the other rules or provisions of the Articles of Incorporation be amended by the

addition of the following paragraph:

In compliance with section 126(4) of the Business Corporations Act (Alberta),

meetings of shareholders of the Corporation shall be held at the place within

Alberta that the directors determine, or in Dallas, Texas; Houston, Texas; New

York, New York; Las Angeles, California; Phoenix, Arizona; New Orleans,

Louisiana or Toronto, Ontario.



- -------------------------------------------------------------------------------4.DATE



SIGNATURE



TITLE



June 20, 1997



_______________________



Assistant Secretary



- -------------------------------------------------------------------------------FOR DEPARTMENTAL USE ONLY FILED









EX-3.3

4



EXHIBIT



3.3



BY-LAW NUMBER 1



A BY-LAW RELATING GENERALLY

TO THE TRANSACTION OF THE

BUSINESS AND AFFAIRS OF

ABACAN RESOURCE CORPORATION





CONTENTS

SECTION 1.

DEFINITIONS AND INTERPRETATION

(1)

(2)

(3)

(4)



Definitions. . . .

Interpretation . .

Headings . . . . .

By-laws Subject to



. .

. .

. .

the



. . .

. . .

. . .

ABCA.



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1

2

2

2



Execution of Documents . . . . . . . . . .

Cheques, Drafts and Notes. . . . . . . . .

Corporate Seal . . . . . . . . . . . . . .

Banking Arrangements . . . . . . . . . . .

Voting Rights in Other Bodies Corporate. .

Withholding Information from Shareholders.

Divisions. . . . . . . . . . . . . . . . .



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3

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3



Borrowing Power. . . . . . . . . . . . . . . .



4



SECTION 2.

BUSINESS OF THE CORPORATION

(1)

(2)

(3)

(4)

(5)

(6)

(7)



SECTION 3.

BORROWING

(1)



SECTION 4.

DIRECTORS

(1)

(2)

(3)

(4)

(5)



(6)

(7)

(8)

(9)

(10)

(11)

(12)



Management of Business

Qualification. . . . .

Number of Directors. .

Increase Number. . . .

Decrease Number. . . .



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Election and Term. . . . . . . . . .

Removal of Directors . . . . . . . .

Ceasing to Hold Office . . . . . . .

Filling Vacancies. . . . . . . . . .

Delegation to a Managing Director or

Remuneration and Expenses. . . . . .

Annual Financial Statements. . . . .



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Committee

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5

5

5

6

6

6

7



SECTION 5.

MEETINGS OF DIRECTORS

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)



Calling Meetings . . . . . . .

Notice . . . . . . . . . . . .

Notice of Adjourned Meeting. .

Meetings Without Notice. . . .

Waiver of Notice . . . . . . .

Quorum . . . . . . . . . . . .

Regular Meetings . . . . . . .

Chairperson of Meetings. . . .

Decision on Questions. . . . .

Meeting by Telephone . . . . .

Resolution in Lieu of Meeting.



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9

9

10

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10

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11

11



Disclosure of Interest . . . . . . . . . . . .

Approval and Voting. . . . . . . . . . . . . .

Effect of Conflict of Interest . . . . . . . .



11

11

12



SECTION 6.

OFFICERS AND APPOINTEES OF THE BOARD

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)



Appointment of Officers.

Term of Office . . . . .

Duties of Officers . . .

Remuneration . . . . . .

Chairperson of the Board

Managing Director. . . .

President. . . . . . . .

Vice-President . . . . .

Secretary. . . . . . . .

Treasurer. . . . . . . .

Agents and Attorneys . .



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SECTION 7.

CONFLICT OF INTEREST

(1)

(2)

(3)



SECTION 8.

LIABILITY AND INDEMNIFICATION

(1)

(2)

(3)



Limitation of Liability. . . . . . . . . . . .

Indemnity. . . . . . . . . . . . . . . . . . .

Insurance. . . . . . . . . . . . . . . . . . .



12

12

13



SECTION 9.

SECURITIES

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)



Shares . . . . . . . . . . . . . . . . . . . .

Options and Other Rights to Acquire Securities

Commissions. . . . . . . . . . . . . . . . . .

Securities Register. . . . . . . . . . . . . .

Transfer Agents and Registrars . . . . . . . .

Dealings with Registered Holders . . . . . . .

Transfers of Securities. . . . . . . . . . . .

Registration of Transfers. . . . . . . . . . .

Lien . . . . . . . . . . . . . . . . . . . . .

Security Certificates. . . . . . . . . . . . .

Entitlement to a Security Certificate. . . . .

Securities Held Jointly. . . . . . . . . . . .



13

13

13

14

14

14

14

14

15

15

15

15





(13)

(14)



Replacement of Security Certificates . . . . .

Fractional Shares. . . . . . . . . . . . . . .



15

16



SECTION 10.



MEETINGS OF SHAREHOLDERS

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

(21)

(22)

(23)

(24)

(25)



Annual Meeting of Shareholders . .

Special Meetings of Shareholders .

Special Business . . . . . . . . .

Place and Time of Meetings . . . .

Notice of Meetings . . . . . . . .

Notice of Adjourned Meetings . . .

Waiver of Notice . . . . . . . . .

Shareholder List . . . . . . . . .

Persons Entitled to Vote . . . . .

Chairperson of Meetings. . . . . .

Scrutineer . . . . . . . . . . . .

Procedure at Meetings. . . . . . .

Persons Entitled to be Present . .

Quorum . . . . . . . . . . . . . .

Loss of Quorum . . . . . . . . . .

Proxy Holders and Representatives.

Time for Deposit of Proxies. . . .

Revocation of Proxies. . . . . . .

Joint Shareholders . . . . . . . .

Decision on Questions. . . . . . .

Voting by Show of Hands. . . . . .

Voting by Ballot . . . . . . . . .

Number of Votes. . . . . . . . . .

Meeting by Telephone . . . . . . .

Resolution in Lieu of Meeting. . .



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16

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SECTION 11.

NOTICES

(1)

(2)

(3)

(4)

(5)

(6)



Method of Notice . . . . . .

Notice to Joint Shareholders

Notice to Successors . . . .

Non-Receipt of Notices . . .

Failure to Give Notice . . .

Execution of Notices . . . .



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SECTION 1.

DEFINITIONS AND INTERPRETATION

(1)

In



DEFINITIONS

the



By-laws,



unless



the



context



otherwise



requires:



(a)



"ABCA" means the Alberta Business Corporations Act, as amended;



(b)



"appoint" includes elect and vice versa;



(c)



"Articles" includes the original or restated articles of incorporation,

articles of amendment, articles of amalgamation, articles of continuance,

articles of

reorganization,

articles of

arrangement,

articles of

dissolution and articles of revival of the Corporation, and any amendment

to any of them;



(d)



"Board" means the board of directors of the Corporation;



(e)



"By-laws" means this by-law and all other by-laws of the

time to time in force;



(f)



"Corporation" means Abacan Resource Corporation;



(g)



"Director" means an individual who is elected or appointed as a director of

the Corporation;



Corporation



from



(h)



"Director, ABCA" means the Director appointed under the ABCA;



(i)



"Indemnified Party" has the meaning

that section;



(j)



"Officer" means an officer of the Corporation appointed by the Board;



(k)



"Record Date" means, for the purpose of determining

to receive notice of a meeting of Shareholders:



set out in section 8 for



purposes of



Shareholders



entitled



i)



the date fixed in advance by the Board for that determination which

precedes the date on which the meeting is to be held by not more than

50 days and not less than 21 days,



ii)



if no date is fixed by the Board, at the close of business

immediately preceding the day on which the notice is given, or



on day



iii) if no notice is given, the day on which the meeting is held;

(l)



"Recorded Address" means:

i)



in the case of a Shareholder, the Shareholder's latest address as

shown in the Corporation's records or those of its transfer agent,



ii)



in the case of joint Shareholders, the latest address as shown in the

Corporation's records or those of its transfer agent in respect of

those joint holders, or the first address appearing if there is more

than one address,



iii) in the case of a Director, the Director's latest address as shown in

the Corporation's records or in the last notice of directors filed

with the Director, ABCA, and

1



iv)



in the case of an Officer or auditor of the Corporation, that person's

latest address as shown in the Corporation's records;



(m)



"Regulations" means the Regulations, as amended, in force from time to time

under the ABCA; and



(n)



"Shareholder" means a shareholder of the Corporation.



(2)



INTERPRETATION



In the

permit:



By-laws,



except



if



defined



in



this section or the context does not



(a)



words and expressions defined or used in the ABCA have the meaning or use

given to them in the ABCA;



(b)



words importing the singular include the plural and vice versa;



(c)



words importing gender include masculine, feminine and neuter genders; and



(d)



words importing persons include bodies corporate.



(3)



HEADINGS



The headings used in the By-laws are inserted for convenience of reference only.

The headings are not to be considered or taken into account in construing the

terms of the By-laws nor are they to be deemed in any way to clarify, modify or

explain the effect of any term of the By-laws.



(4)



BY-LAWS



SUBJECT



TO



THE



ABCA



The By-laws are subject to the ABCA and the Regulations, to any unanimous

shareholder agreement and to the Articles, in that order.

SECTION 2.

BUSINESS OF THE CORPORATION

(1)



EXECUTION



OF



DOCUMENTS



Documents may be executed on behalf of the Corporation in the manner and by the

persons the Board may designate by resolution.

(2)



CHEQUES,



DRAFTS



AND



NOTES



Cheques, drafts or orders for the payment of money, notes, acceptances and bills

of exchange must be signed in the manner and by the persons the Board may

designate by resolution.

(3)



CORPORATE



SEAL



2



The Board may, by resolution, adopt a corporate seal containing the name of the

Corporation as the corporate seal. A document issued by or executed on behalf

of the Corporation is not invalid only because the corporate seal is not affixed

to that document. A document requiring authentication by the Corporation does

not need to be under seal.

(4)



BANKING



ARRANGEMENTS



The Board may open any bank accounts the Corporation may require at a financial

institution designated by resolution of the Board. The Board may adopt,

authorize, execute or deposit any document furnished or required by the

financial institution and may do any other thing as may be necessarily

incidental to the banking and financial arrangements of the Corporation.

(5)



VOTING



RIGHTS



IN



OTHER



BODIES



CORPORATE



The persons designated by the Board to execute documents on behalf of the

Corporation may execute and deliver instruments of proxy and arrange for the

issue of voting certificates or other evidence of the right to exercise voting

rights attached to any securities held by the Corporation in another body

corporate. The instruments, certificates or other evidence shall be in favour

of the person that is designated by the persons executing the instruments of

proxy or arranging for the issue of voting certificates or other evidence of the

right to exercise voting rights. In addition, the Board may direct the manner

in which and the person by whom any particular voting right or class of voting

rights may be exercised.

(6)



WITHHOLDING



INFORMATION



FROM



SHAREHOLDERS



No Shareholder is entitled to obtain any information respecting any detail or

conduct of the Corporation's business which, in the opinion of the Board, would

not be in the best interests of the Shareholders or the Corporation to

communicate to the public.

The Board may determine whether and under what conditions the accounts, records

and documents of the Corporation are open to inspection by the Shareholders. No

Shareholder has a right to inspect any account, record or document of the

Corporation except as conferred by the ABCA or authorized by resolution of the

Board or by resolution passed at a meeting of Shareholders.

(7)



DIVISIONS



The Board may cause any part of the business and operations of the Corporation

to be segregated or consolidated into one or more divisions upon the basis the

Board considers appropriate. Any division may be designated by the name the

Board determines and may transact business under that name. The name of the

Corporation must be set out in legible characters in all contracts, invoices,

negotiable instruments and orders for goods or services issued or made by or on

behalf of any division of the Corporation.

SECTION 3.

BORROWING

(1)



BORROWING



POWER



Without limiting the borrowing power of the Corporation provided by the ABCA,

the Board may, without authorization of the Shareholders,

3



(a) borrow money on the credit of the Corporation;

(b)



issue, reissue, sell or pledge debt obligations of the Corporation;



(c)



subject to section 44 of the ABCA, give a guarantee on behalf of the

Corporation to secure performance of an obligation of any person; and



(d)



mortgage, hypothecate, pledge or otherwise create a security interest in

all or any property of the Corporation, owned or subsequently acquired, to

secure any obligation of the Corporation.



The Directors may, by resolution, delegate to a Director, a committee of

Directors or an Officer all or any of the powers conferred on them by this

section.

SECTION 4.

DIRECTORS

(1)



MANAGEMENT



OF



BUSINESS



The Board shall manage the business

Director must comply with the ABCA,

By-laws.

(2)

A



and affairs of the Corporation. Every

the Regulations, the Articles and the



QUALIFICATION

person



is



disqualified



for



election



as



a



Director



if



that



person:



(a)



is less than 18 years of age;



(b)



is of unsound mind and has been found so by a court in Canada or elsewhere;



(c)



is not an individual; or



(d)



has the status of bankrupt.



A

(3)



Director



is



not



NUMBER



required

OF



to



hold



shares



issued



by



the



Corporation.



DIRECTORS



The Board is to consist of that number of Directors permitted by the Articles.

In the event the Articles permit a minimum and maximum number of Directors, the

Board is to consist of the number of Directors the Shareholders determine by

ordinary resolution. The number of Directors at any one time may not be less

than the minimum or more than the maximum number permitted by the Articles.

(4)



INCREASE



NUMBER



4



The Shareholders may amend the Articles to increase the number, or the minimum

or maximum number, of Directors. Upon the adoption of an amendment increasing

the number or minimum number of Directors, the Shareholders may, at the meeting

at which they adopt the amendment, elect the additional number of Directors

authorized by the amendment. Upon the issue of a certificate of amendment, the

Articles are deemed to be amended as of the date the Shareholders adopted the

amendment.

(5)



DECREASE



NUMBER



The Shareholders may amend the Articles to decrease the number, or the minimum

or maximum number, of Directors. No decrease shortens the term of an incumbent

Director.

(6)



ELECTION



AND



TERM



Each Director named in the notice of directors filed at the time of

incorporation holds office from the issue of the certificate of incorporation

until the first meeting of Shareholders. The Shareholders are to elect

Directors by ordinary resolution at the first meeting of Shareholders and at

each succeeding annual meeting at which an election of Directors is required.

The elected Directors are to hold office for a term expiring not later than the

close of the third annual meeting of Shareholders following the election.

A

Director not elected for an expressly stated term ceases to hold office at the

close of the first annual meeting of Shareholders following the Director's

election. If Directors are not elected at a meeting of Shareholders, the

incumbent Directors continue in office until their respective successors are

elected.

(7)



REMOVAL



OF



DIRECTORS



The Shareholders may by ordinary resolution passed at a special meeting of

Shareholders remove a Director from office. Any vacancy created by the removal

of a Director may be filled at the meeting at which the Director was removed,

failing which the vacancy may be filled by a quorum of Directors.

(8)

A



CEASING

Director



ceases



TO

to



HOLD

hold



OFFICE

office



(a)



the Director dies or resigns;



(b)



the Director is removed

Director; or



(c)



the Director ceases to be

subsection (2).



when:



from office by the

qualified



for



Shareholders

election



who elected the



as a Director



under



A Director's resignation is effective at the time a written resignation is sent

to the Corporation, or at the time specified in the resignation, whichever is

later.

(9)



FILLING



VACANCIES



A quorum of Directors may fill a vacancy in the Board, except a vacancy

resulting from an increase in the number or minimum number of Directors or from

a failure to elect the number or minimum number of Directors required by the

Articles. If there is not a quorum of Directors, or if there has been a failure

to elect the number or minimum number of Directors required by the Articles, the

Directors then in office must immediately call a special meeting of Shareholders

to fill the vacancy. If the Directors fail to call a meeting, or if there are

no Directors then in office, the meeting may be called by any Shareholder.



5



(10)



DELEGATION



TO



A



MANAGING



DIRECTOR



OR



COMMITTEE



The Directors may appoint from their number a Managing Director or a committee

of Directors. A majority of the members of a committee of Directors must be

resident Canadians. A Managing Director must be a resident Canadian. The

Directors may delegate to a Managing Director or a committee of Directors any of

the powers of the Directors. However, no Managing Director and no committee of

Directors has authority to:

(a)



submit to the Shareholders any question or matter requiring the approval of

the Shareholders;



(b)



fill a vacancy among the Directors or in the office of auditor;



(c)



issue securities,

Directors;



(d)



declare dividends;



(e)



purchase, redeem or otherwise acquire shares issued by the Corporation;



(f)



pay a commission in connection with the sale of shares of the Corporation;



(g)



approve a management proxy circular;



(h)



approve a take-over bid circular or directors' circular;



(i)



approve any financial statements; or



(j)



adopt, amend or repeal By-laws.



(11)



except in the manner and on the terms authorized by the



REMUNERATION



AND



EXPENSES



The Directors are entitled to receive remuneration for their services in the

amount the Board determines. Subject to the Board's approval, the Directors are

also entitled to be reimbursed for travelling and other expenses incurred by

them in attending meetings of the Board or any committee of Directors or in the

performance of their duties as Directors.

Nothing contained in the By-laws precludes a Director from serving the

Corporation in another capacity and receiving remuneration for acting in that

other capacity.

(12)



ANNUAL



FINANCIAL



STATEMENTS



The Board must place before the Shareholders at every annual meeting of

Shareholders financial statements which have been approved by the Board as

evidenced by the signature of one or more of the Directors, the report of the

auditor and any further information respecting the financial position of the

Corporation and the results of its operations that is required by the ABCA, the

Regulations, the Articles, the By-laws or any unanimous shareholder agreement.

6



SECTION 5.

MEETINGS OF DIRECTORS

(1)



CALLING



MEETINGS



The Chairperson of the Board, the Managing Director or any Director may call a

meeting of Directors. A meeting of Directors or of a committee of Directors may

be held within or outside of Canada at the time and place indicated in the



notice



referred



(2)



to



in



subsection



(2).



NOTICE



Notice of the time and place of a meeting of Directors or any committee of

Directors must be given to each Director or each Director who is a member of a

committee not less than 48 hours before the time fixed for that meeting. Notice

must be given in the manner prescribed in section 11. A notice of a meeting of

Directors need not specify the purpose of the business to be transacted at the

meeting except when the business to be transacted deals with a proposal to:

(a)



submit to the Shareholders any question or matter requiring the approval of

the Shareholders;



(b)



fill a vacancy among the Directors or in the office of auditor;



(c)



issue securities;



(d)



declare dividends;



(e)



purchase, redeem or otherwise acquire shares issued by the Corporation;



(f)



pay a commission in connection with the sale of shares of the Corporation;



(g)



approve a management proxy circular;



(h)



approve a take-over bid circular or directors' circular;



(i)



approve any financial statements; or



(j)



adopt, amend or repeal By-laws.



(3)



NOTICE



OF



ADJOURNED



MEETING



Notice of an adjourned meeting of Directors is not required if a quorum is

present at the original meeting and if the time and place of the adjourned

meeting is announced at the original meeting. If a meeting is adjourned because

a quorum is not present, notice of the time and place of the adjourned meeting

must be given as for the original meeting. The adjourned meeting may proceed

with the business to have been transacted at the original meeting, even though a

quorum is not present at the adjourned meeting.

(4)



MEETINGS



No notice

given:



WITHOUT



NOTICE



of a meeting of Directors or of a committee of Directors needs to be



(a)



to a newly elected Board following

meeting of Shareholders; or



(b)



for a meeting of Directors

vacancy in the Board,



if



a



quorum



is



at which a



its election at an annual or special

Director



is



appointed



to fill a



present.

7





(5)



WAIVER



OF



NOTICE



A Director may waive, in any manner, notice of a meeting of Directors or of a

committee of Directors. Attendance of a Director at a meeting of Directors or

of a committee of Directors is a waiver of notice of the meeting, except when

the Director attends the meeting for the express purpose of objecting to the

transaction of any business on the grounds that the meeting is not lawfully

called.



(6)



QUORUM



The Directors may fix the quorum for meetings of Directors or of a committee of

Directors, but unless so fixed, a majority of the Directors or of a committee of

Directors constitutes a quorum. No business may be transacted unless a majority

of the Directors present are resident Canadians.

(7)



REGULAR



MEETINGS



The Board may by resolution establish one or more days in a month for regular

meetings of the Board at a time and place to be named in the resolution. No

notice is required for a regular meeting.

(8)



CHAIRPERSON



OF



MEETINGS



The chairperson of any meeting of Directors is the first mentioned of the

following Officers (if appointed) who is a Director and is present at the

meeting: Chairperson of the Board, Managing Director, or President. If none of

the foregoing Officers are present, the Directors present may choose one of

their number to be chairperson of the meeting.

(9)



DECISION



ON



QUESTIONS



Every resolution submitted to a meeting of Directors or of a committee of

Directors must be decided by a majority of votes cast at the meeting. In the

case of an equality of votes, the chairperson does not have a casting vote.

(10)



MEETING



BY



TELEPHONE



If all the Directors consent, a Director may participate in a meeting of

Directors or of a committee of Directors by means of telephone or other

communication facilities that permit all persons participating in the meeting to

hear each other. A Director participating in a meeting by means of telephone or

other communication facilities is deemed to be present at the meeting.

(11)



RESOLUTION



IN



LIEU



OF



MEETING



A resolution in writing signed by all the Directors entitled to vote on that

resolution at a meeting of Directors or committee of Directors is as valid as if

it had been passed at a meeting of Directors or committee of Directors. A

resolution in writing takes effect on the date it is expressed to be effective.

A resolution in writing may be signed in one or more counterparts, all of which

together constitute the same resolution. A counterpart signed by a Director and

transmitted by facsimile or other device capable of transmitting a printed

message is as valid as an originally signed counterpart.

8



SECTION 6.

OFFICERS AND APPOINTEES OF THE BOARD

(1)



APPOINTMENT



OF



OFFICERS



The Directors may designate the offices of the Corporation, appoint as officers

persons of full capacity, specify their duties and delegate to them powers to

manage the business and affairs of the Corporation, except those powers referred

to in section 4 which may not be delegated to a Managing Director or to a

committee of Directors. Unless required by the By-laws, an Officer does not

have to be a Director. The same individual may hold two or more offices of the

Corporation.

(2)



TERM



OF



OFFICE



An Officer holds office from the date of the Officer's appointment until a

successor is appointed or until the Officer's resignation or removal. An

officer may resign by giving written notice to the Board. All Officers are

subject to removal by the Board, with or without cause.

(3)



DUTIES



OF



OFFICERS



An Officer has all the powers and authority and must perform all the duties

usually incident to, or specified in the By-laws or by the Board for, the office

held.

(4)



REMUNERATION



The Officers are

amount the Board

(5)



entitled to

determines.



CHAIRPERSON



OF



THE



receive remuneration for their services in the

BOARD



If appointed and present at the meeting, the Chairperson of the Board presides

at all meetings of Directors, committees of Directors and, in the absence of the

President, at all meetings of Shareholders. The Chairperson of the Board must

be a Director.

(6)



MANAGING



DIRECTOR



If appointed, the Managing Director is responsible for the general supervision

of the affairs of the Corporation. During the absence or disability of the

Chairperson of the Board, or if no Chairperson of the Board has been appointed,

the Managing Director exercises the functions of that office. Subject to

section 4, the Board may delegate to the Managing Director any of the powers of

the Board.

(7)



PRESIDENT



If appointed, the President is the chief executive officer of the Corporation

responsible for the management of the business and affairs of the Corporation.

During the absence or disability of the Managing Director, or if no Managing

Director has been appointed, the President also exercises the functions of that

office. The President may not preside as chairperson at any meeting of the

Directors or of any committee of Directors unless the President is a Director.

(8)



VICE-PRESIDENT



During the absence or disability of the President, or if no President has been

appointed, the Vice-President or if there is more than one, the Vice-President

designated by the Board, exercises the functions of the office of the President.

9



(9)



SECRETARY



If appointed, the Secretary must call meetings of the Directors or of a

committee of Directors at the request of a Director. The Secretary must attend

all meetings of Directors, of committees of Directors and of Shareholders and

prepare and maintain a record of the minutes of the proceedings. The Secretary

is the custodian of the corporate seal, the minute book and all records,

documents and instruments belonging to the Corporation.

(10)



TREASURER



If appointed, the Treasurer is responsible for the preparation and maintenance

of proper accounting records, the deposit of money, the safe-keeping of

securities and the disbursement of funds of the Corporation. The Treasurer must

render to the Board an account of all financial transactions of the Corporation

upon request.



(11)



AGENTS



AND



ATTORNEYS



The Board has the power to appoint agents or attorneys for the Corporation in or

outside of Canada with any power the Board considers advisable.

SECTION 7.

CONFLICT OF INTEREST

(1)

A



DISCLOSURE

Director



or



OF



Officer



INTEREST



who:



(a)



is a party to a material

Corporation; or



contract or proposed



material



contract with the



(b)



is a director or an officer of or has a material interest in any person who

is a party to a material contract or proposed material contract with the

Corporation,



must disclose in writing to the Corporation or request to have entered in the

minutes of meetings of the Directors the nature and extent of the Director's or

Officer's interest.

(2)



APPROVAL



AND



VOTING



A Director or Officer must disclose in writing to the Corporation, or request to

have entered in the minutes of meetings of Directors, the nature and extent of

the Director's or Officer's interest in a material contract or proposed material

contract if the contract is one that in the ordinary course of the Corporation's

business would not require approval by the Board or the Shareholders. The

disclosure must be made immediately after the Director or Officer becomes aware

of the contract or proposed contract. A Director who is required to disclose an

interest in a material contract or proposed material contract may not vote on

any resolution to approve the contract unless the contract is:

(a)



an arrangement by way of security for money lent

undertaken by the Director for the benefit of the

affiliate;



to or obligations

Corporation or an



(b)



a contract relating primarily to the Director's remuneration as a Director

or Officer, employee or agent of the Corporation or as a director, officer,

employee or agent of an affiliate;



10



(c) a contract for indemnity or insurance under the ABCA; or

(d)

(3)



a contract with an affiliate.

EFFECT



OF



CONFLICT



OF



INTEREST



If a material contract is made between the Corporation and a Director or

Officer, or between the Corporation and another person of which a Director or

Officer is a director or officer or in which the Director or Officer has a

material interest, the contract is neither void nor voidable by reason only of

that relationship, or by reason only that a Director with an interest in the

contract is present at or is counted to determine the presence of a quorum at a

meeting of Directors or committee of Directors that authorized the contract, if

the Director or Officer disclosed the Director's or Officer's interest in the

contract in the manner prescribed by the ABCA and the contract was approved by

the Board or the Shareholders and was reasonable and fair to the Corporation at

the time it was approved.

SECTION 8.



LIABILITY AND INDEMNIFICATION

(1)



LIMITATION



OF



LIABILITY



Every Director and Officer in exercising the powers and discharging the duties

of office must act honestly and in good faith with a view to the best interests

of the Corporation and must exercise the care, diligence and skill that a

reasonably prudent person would exercise in comparable circumstances. No

Director or Officer is liable for:

(a)



the acts, omissions or defaults

employee of the Corporation;



of any other



Director or Officer or an



(b)



any loss, damage or expense incurred by the Corporation through the

insufficiency or deficiency of title to any property acquired for or on

behalf of the Corporation;



(c)



the insufficiency or deficiency of any security in or upon which any of the

money of the Corporation is invested;



(d)



any loss or damage arising from the bankruptcy, insolvency or tortious or

criminal acts of any person with whom any of the Corporation's money is, or

securities or other property are, deposited;



(e)



any loss occasioned by any error of judgment or oversight; or



(f)



any other loss, damage or misfortune which occurs in the execution of the

duties of office or in relation to it,



unless occasioned by the wilful neglect or default of that Director or Officer.

Nothing in this By-law relieves any Director or Officer of any liability imposed

by the ABCA or otherwise by law.

(2)



INDEMNITY



The Corporation shall indemnify a Director or Officer, a former Director or

Officer and a person who acts or acted at the Corporation's request as a

director or officer of a body corporate of which the Corporation is or was a

shareholder or creditor (the "Indemnified Parties") and the heirs and legal

representatives of each of them, against all costs, charges and expenses, which

includes, without limiting the generality of the foregoing, the fees, charges

and disbursements of legal counsel on an

11



as-between-a-solicitor-and-the-solicitor's-own-client basis and an amount paid

to settle an action or satisfy a judgment, reasonably incurred by an Indemnified

Party, or the heirs or legal representatives of an Indemnified Party, or both,

in respect of any action or proceeding to which any of them is made a party by

reason of an Indemnified Party being or having been a Director or Officer or a

director or officer of that body corporate, if:

(a)



the Indemnified Party acted honestly and in good faith with a view to the

best interests of the Corporation; and



(b)



in the case of a criminal or administrative action or proceeding that is

enforced by a monetary penalty, the Indemnified Party had reasonable

grounds for believing that the Indemnified Party's conduct was lawful.



The Corporation shall indemnify an Indemnified Party and the heirs and legal

representatives of an Indemnified Party in any other circumstances that the ABCA

permits or requires. Nothing in this By-law limits the right of a person

entitled to indemnity to claim indemnity apart from the provisions of this

By-law.



(3)



INSURANCE



The Corporation may purchase and maintain insurance for the benefit of a person

referred to in subsection (2) against the liabilities and in the amounts the

ABCA permits and the Board approves.

SECTION 9.

SECURITIES

(1)



SHARES



Shares of the Corporation may be issued at the times, to the persons and for the

consideration the Board determines. No share may be issued until the

consideration for the share is fully paid in money or in property or past

services that are not less in value than the fair equivalent of the money that

the Corporation would have received if the share had been issued for money.

(2)



OPTIONS



AND



OTHER



RIGHTS



TO



ACQUIRE



SECURITIES



The Corporation may issue certificates, warrants or other evidences of

conversion privileges, options or rights to acquire securities of the

Corporation. The conditions attached to the conversion privileges, options and

rights must be set out in the certificates, warrants or other evidences or in

certificates evidencing the securities to which the conversion privileges,

options or rights are attached.

(3)



COMMISSIONS



The Board may authorize the Corporation to pay a reasonable commission to any

person in consideration of that person purchasing or agreeing to purchase shares

of the Corporation from the Corporation or from any other person, or procuring

or agreeing to procure purchasers for shares of the Corporation.

12



(4)



SECURITIES



REGISTER



The Corporation shall maintain a securities register in which it records the

securities issued by it in registered form, showing with respect to each class

or series of securities:

(a)



the names, alphabetically arranged and the latest

person who is or has been a security holder;



(b)



the number of securities held by each security holder; and



(c)



the date and particulars of the issue and transfer of each security.



(5)



TRANSFER



AGENTS



AND



known



address of each



REGISTRARS



The Corporation may appoint an agent to maintain a central securities register

and branch securities registers.

An agent may be designated as a transfer

agent or a branch transfer agent, and a registrar, according to the agent's

function. An agent's appointment may be terminated at any time. The Board may

provide for the registration or transfer of securities by a transfer agent,

branch transfer agent or registrar.

(6)



DEALINGS



WITH



REGISTERED



HOLDERS



The Corporation may treat the registered owner of a security as the person

exclusively entitled to vote, to receive notices, to receive any interest,

dividend or other payments in respect of the security, and otherwise to exercise

all the rights and powers of an owner of the security.

(7)



TRANSFERS



OF



SECURITIES



Securities of the Corporation may be transferred in the form of a transfer

endorsement on the security certificates issued in respect of the securities of

the Corporation, or in any form of transfer endorsement which may be approved by

resolution of the Board.

(8)



REGISTRATION



OF



TRANSFERS



If a security in registered form is presented for transfer, the Corporation must

register the transfer if:

(a)



the security is endorsed by the person specified by the security or by

special endorsement to be entitled to the security or by the person's

successor, fiduciary, survivor, attorney or authorized agent, as the case

may be;



(b)



reasonable

effective;



(c)



the Corporation has no duty

discharged its duty to do so;



(d)



any applicable

with;



(e)



the transfer is rightful or is to a bona fide purchaser; and



(f)



the fee prescribed by the Board for a

respect of a transfer has been paid.



assurance



is



given



that



to



the



inquire



law relating to the



endorsement

into



is



adverse



genuine



claims,



and



or has



collection of taxes has been complied



security



certificate



issued in



13



(9)



LIEN



If the Articles provide that the Corporation has a lien on a share registered in

the name of a Shareholder or the Shareholder's legal representative for a debt

of the Shareholder to the Corporation, and the Shareholder is indebted to the

Corporation, the Corporation may refuse to register any transfer of the holder's

shares pending enforcement of the lien.

(10)



SECURITY



CERTIFICATES



Security certificates and acknowledgements of a security holder's right to

obtain a security certificate must be in a form the Board approves by

resolution. A security certificate must be signed by at least one Director or

Officer. Unless the Board otherwise determines, security certificates

representing securities in respect of which a transfer agent or registrar has

been appointed are not valid unless countersigned by or on behalf of the

transfer agent or registrar. Any signature may be printed or otherwise

mechanically reproduced on a security certificate. If a security certificate

contains a printed or mechanically reproduced signature of a person, the

Corporation may issue the security certificate, notwithstanding that the person

has ceased to be a Director or Officer, and the security certificate is as valid

as if the person were a Director or Officer at the date of issue.

(11)



ENTITLEMENT



TO



A



SECURITY



CERTIFICATE



A security holder is entitled at the holder's option to a security certificate

or to a non-transferable written acknowledgement of the holder's right to obtain

a security certificate from the Corporation in respect of the securities of the

Corporation held by that holder.

(12)

The



SECURITIES

Corporation



HELD



JOINTLY



is not required to issue more than one security certificate in



respect of securities held jointly by several persons. Delivery of a

certificate to one of the joint holders is sufficient delivery to all of them.

Any one of the joint holders may give effectual receipts for the certificate

issued in respect of the securities or for any dividend, bonus, return of

capital or other money payable or warrant issuable in respect of the security.

(13)



REPLACEMENT



OF



SECURITY



CERTIFICATES



The Board or an Officer or agent designated by the Board may in its or the

Officer's or agent's discretion direct the issue of a new security certificate

in place of a certificate that has been lost, destroyed or wrongfully taken. A

new security certificate may be issued only on payment of a reasonable fee and

on any terms as to indemnity, reimbursement of expenses and evidence of loss of

title as the Board may prescribe.

(14)



FRACTIONAL



SHARES



The Corporation may issue a certificate for a fractional share or may issue in

its place scrip certificates in bearer form that entitle the holder to receive a

certificate for a full share by exchanging scrip certificates aggregating a full

share. The Directors may attach conditions to any scrip certificates issued by

the Corporation, including conditions that:

(a)



the scrip certificates become void if they are not exchanged for a share

certificate representing a full share before a specified date; and



14



(b) any shares for which those scrip certificates are exchangeable may,

notwithstanding any pre-emptive right, be issued by the Corporation to any

person and the proceeds of those shares distributed rateably to the holders

of the scrip certificates.

SECTION 10.

MEETINGS OF SHAREHOLDERS

(1)



ANNUAL



MEETING



OF



SHAREHOLDERS



The Board must call an annual meeting of Shareholders to be held not later than

18 months after the Corporation comes into existence and subsequently, not later

than 15 months after holding the last preceding annual meeting. An annual

meeting is to be held for the purposes of considering the financial statements

and auditor's report, electing Directors, appointing an auditor and transacting

any other business that may properly be brought before the meeting.

(2)

The

(3)



SPECIAL

Board



may



at



SPECIAL



MEETINGS

any



time



OF



SHAREHOLDERS



call



a



special



meeting



of



Shareholders.



BUSINESS



All business transacted at a special meeting of Shareholders and all business

transacted at an annual meeting of Shareholders, except consideration of the

financial statements and auditor's report, election of Directors and

reappointment of the incumbent auditor, is deemed to be special business.

(4)



PLACE



AND



TIME



OF



MEETINGS



Meetings of shareholders may be held at such place in Alberta, Dallas, Texas;

Houston, Texas; New York, New York;, Los Angeles, California, Phoenix, Arizona,

New Orleans, Louisiana or Toronto, Ontario as the Board shall determine, at such

time and date as the Board shall determine.

(5)



NOTICE



OF



MEETINGS



Notice of the time and place of a meeting of Shareholders must be sent not less

than 21 days and not more than 50 days before the meeting to:

(a)



each Shareholder entitled to vote at the meeting;



(b)



each Director; and



(c)



the auditor of the Corporation.



15



Notice of a meeting of Shareholders called for the purpose of transacting any

business other than consideration of the financial statements and auditor's

report, election of Directors and reappointment of the incumbent auditor must

state the nature of the business to be transacted in sufficient detail to permit

a Shareholder to form a reasoned judgment on that business and must state the

text of any special resolution to be submitted to the meeting.

(6)



NOTICE



OF



ADJOURNED



MEETINGS



With the consent of the Shareholders present at a meeting of Shareholders, the

chairperson may adjourn that meeting to another fixed time and place. If a

meeting of Shareholders is adjourned for less than 30 days, it is not necessary

to give notice of the adjourned meeting, other than by verbal announcement at

the time of the adjournment. If a meeting of Shareholders is adjourned by one

or more adjournments for an aggregate of 30 days or more, notice of the

adjourned meeting must be given as for the original meeting. The adjourned

meeting may proceed with the business to have been transacted at the original

meeting, even though a quorum is not present at the adjourned meeting.

(7)



WAIVER



OF



NOTICE



A Shareholder and any other person entitled to attend a meeting of Shareholders

may waive in any manner notice of a meeting of Shareholders. Attendance of a

Shareholder or other person at a meeting of Shareholders is a waiver of notice

of the meeting, except when the Shareholder or other person attends the meeting

for the express purpose of objecting to the transaction of any business on the

grounds that the meeting is not lawfully called.

(8)



SHAREHOLDER



LIST



The Corporation must prepare a list of Shareholders entitled to receive notice

of a meeting of Shareholders, arranged in alphabetical order and showing the

number of shares held by each Shareholder,

(a)



if a Record Date is fixed, not later than 10 days after that date; or



(b)



if no Record Date is fixed,



A



i)



at the close of business on the day

which the notice is given, or



ii)



if no notice is given, on the day on which the meeting is held.



Shareholder



may



examine



the



list



of



immediately



preceding the day on



Shareholders:



(c)



during usual business hours at the registered office of the Corporation or

at the place where its central securities register is maintained; and



(d)



at the meeting of Shareholders for which the list was prepared.



(9)

A



PERSONS

person



named



ENTITLED



TO



VOTE



in a list of Shareholders is entitled to vote the shares shown



opposite the person's name at the meeting to which the list relates, except to

the extent that:

16



(a) i) if a Record Date is fixed, the person transfers

person's shares after the Record Date, or

ii)



(b)



if no Record Date is fixed, the person transfers ownership of any of

the person's shares after the date on which the list of Shareholders

is prepared; and



the transferee of those shares

i)



produces properly endorsed share certificates, or



ii)



otherwise establishes ownership of the shares,



and demands, not

name be included

in



ownership of any of the



which



(10)



case



later than 10 days before the meeting, that the transferee's

in the list before the meeting,



the



transferee



CHAIRPERSON



OF



is



entitled



to



vote



the



shares.



MEETINGS



The chairperson of any meeting of Shareholders is the first mentioned of the

following Officers (if appointed) who is present at the meeting: President,

Chairperson of the Board or Managing Director. If none of the foregoing

Officers are present, the Shareholders present and entitled to vote at the

meeting may choose a chairperson from among those individuals present.

(11)



SCRUTINEER



If desired, one or more scrutineers, who need not be Shareholders, may be

appointed by resolution or by the chairperson of the meeting with the consent of

the meeting.

(12)



PROCEDURE



AT



MEETINGS



The chairperson of any meeting of Shareholders shall conduct the proceedings at

the meeting in all respects. The chairperson's decision on any matter or thing

relating to procedure, including, without limiting the generality of the

foregoing, any question regarding the validity of any instrument of proxy or

other evidence of authority to vote, is conclusive and binding upon the

Shareholders.

(13)



PERSONS

persons



ENTITLED



entitled



to



TO

be



BE



PRESENT



The



only



present



at a meeting of Shareholders are:



(a)



the Shareholders entitled to vote at the meeting;



(b)



the Directors;



17



(c) the auditor of the Corporation; and

(d)



any others who, although not entitled to vote, are entitled or required

under any provision of the ABCA, any unanimous shareholder agreement, the

Articles or the By-laws to be present at the meeting.



Any

the



other person may be admitted only on the invitation of the chairperson of

meeting or with the consent of the meeting.



(14)



QUORUM



A quorum of Shareholders is present at a meeting of Shareholders if at least two

individuals are present, each of whom is entitled to vote at the meeting, and

who hold or represent by proxy in the aggregate not less than 5% of the total

number of shares entitled to be voted at the meeting. If any share entitled to

be voted at a meeting of Shareholders is held by two or more persons jointly,

the persons or those of them who attend the meeting of Shareholders constitute

only one Shareholder for the purpose of determining whether a quorum of

Shareholders is present.

(15)



LOSS



OF



QUORUM



If a quorum is present at the opening of a meeting of Shareholders, the

Shareholders present or represented by proxy may proceed with the business of

the meeting, even if a quorum is not present throughout the meeting. If a

quorum is not present at the opening of a meeting of Shareholders, the

Shareholders present or represented by proxy may adjourn the meeting to a fixed

time and place but may not transact any other business.

(16)



PROXY



HOLDERS



AND



REPRESENTATIVES



A Shareholder entitled to vote at a meeting of Shareholders may by means of a

proxy appoint a proxy holder and one or more alternate proxy holders, who are

not required to be Shareholders, to attend and act at the meeting in the manner

and to the extent authorized by the proxy and with the authority conferred by

the proxy. A proxy must be executed by the Shareholder or by the Shareholder's

attorney authorized in writing and be in the form prescribed by the Regulations.

A proxy is valid only at the meeting in respect of which it is given or any

adjournment of that meeting.

A Shareholder that is a body corporate or association may, by resolution of its

directors or governing body, authorize an individual to represent it at a

meeting of Shareholders. That individual's authority may be established by

depositing with the Corporation prior to the commencement of the meeting a

certified copy of the resolution passed by the Shareholder's directors or

governing body or other evidence of the individual's authority to vote. A

resolution or other evidence of authority to vote is valid only at the meeting

in respect of which it is given or any adjournment of that meeting.

(17)



TIME



FOR



DEPOSIT



OF



PROXIES



The Board may specify in a notice calling a meeting of Shareholders a time not

exceeding 48 hours, excluding Saturdays and holidays, preceding the meeting or

an adjournment of the meeting before which proxies to be used at the meeting

must be deposited with the Corporation or its agent.

If no time for the

deposit of proxies has been specified in a notice calling a meeting of

Shareholders, a proxy to be used at the meeting must be deposited with the

Secretary of the Corporation or the chairperson of the meeting prior to the

commencement of the meeting.

18



(18)

A

(a)



REVOCATION



Shareholder



may



OF



revoke



PROXIES

a



proxy:



by depositing an instrument in writing executed by the

the Shareholder's attorney authorized in writing:



Shareholder



or by



i)



at the registered office of the Corporation at any time up to and

including the last business day preceding the day of the meeting, or

an adjournment of that meeting, at which the proxy is to be used, or



ii)



with the



chairperson



of the



meeting on the day of the meeting or an



adjournment of the meeting; or

(b)



in any other manner permitted by law.



(19)

If two

meeting

two or

as one

(20)



JOINT



SHAREHOLDERS



or more persons hold shares jointly, one of those holders present at a

of Shareholders may, in the absence of the others, vote the shares. If

more of those persons are present in person or by proxy, they must vote

on the shares jointly held by them.

DECISION



ON



QUESTIONS



At every meeting of Shareholders all questions proposed for the consideration of

Shareholders must be decided by the majority of votes, unless otherwise required

by the ABCA or the Articles. In the case of an equality of votes, the

chairperson of the meeting does not, either on a show of hands or verbal poll or

on a ballot, have a casting vote in addition to the vote or votes to which the

chairperson may be entitled as a Shareholder or proxy holder.

(21)



VOTING



BY



SHOW



OF



HANDS



Subject to subsection (22), voting at a meeting of Shareholders must be by a

show of hands of those present in person or represented by proxy or by a verbal

poll of those present by telephone or other communication facilities. When a

vote by show of hands has been taken upon a question, a declaration by the

chairperson of the meeting that the vote has been carried, carried by a

particular majority or not carried, an entry to that effect in the minutes of

the meeting is conclusive evidence of the fact without proof of the number of

votes recorded in favour of or against any resolution or other proceeding in

respect of the question.

(22)



VOTING



BY



BALLOT



If a ballot is required by the chairperson of the meeting or is demanded by a

Shareholder or proxy holder entitled to vote at the meeting, either before or

after any vote by show of hands or verbal poll, voting must be by ballot. A

demand for a ballot may be withdrawn at any time before the ballot is taken. If

a ballot is taken on a question, a prior vote on that question by show of hands

or verbal poll has no effect.

(23)



NUMBER



OF



VOTES



At every meeting a Shareholder present in person or represented by proxy or

present by telephone or other communication facilities and entitled to vote has

one vote for each share held.

19



(24)



MEETING



BY



TELEPHONE



Any person described in subsection (13) may participate in a meeting of

Shareholders by means of telephone or other communication facilities that permit

all persons participating in the meeting to hear each other. A Shareholder

participating in a meeting by means of telephone or other communication

facilities is deemed to be present at the meeting.

(25)



RESOLUTION



IN



LIEU



OF



MEETING



A resolution in writing signed by all the Shareholders entitled to vote on that

resolution at a meeting of Shareholders is as valid as if it had been passed at

a meeting of Shareholders. A resolution in writing takes effect on the date it

is expressed to be effective.

A



resolution in writing may be signed in one or more counterparts, all of which



together constitute the same resolution. A counterpart signed by a Shareholder

and transmitted by facsimile or other device capable of transmitting a printed

message is as valid as an originally signed counterpart.

SECTION 11.

NOTICES

(1)



METHOD



OF



NOTICE



A notice or document required to be sent to a Shareholder, Director, Officer or

auditor of the Corporation may be given by personal delivery, prepaid

transmitted or recorded communication or prepaid mail addressed to the recipient

at the recipient's Recorded Address. A notice or document sent by personal

delivery is deemed to be given when it is actually delivered. A notice or

document sent by means of prepaid transmitted or recorded communication is

deemed to be given when dispatched or delivered to the appropriate communication

company or agency or its representative for dispatch. A notice or document sent

by mail is deemed to be given when deposited at a post office or in a public

letter box.

(2)



NOTICE



TO



JOINT



SHAREHOLDERS



If two or more persons are registered as joint holders of any share, a notice or

document may be sent or delivered to all of them, but notice given to any one

joint Shareholder is sufficient notice to the others.

(3)



NOTICE



TO



SUCCESSORS



Every person who, by operation of law, transfer, death of a Shareholder or any

other means becomes entitled to any share, is bound by every notice in respect

of the share which is sent or delivered to the Shareholder prior to the person's

name and address being entered in the Corporation's securities register and

prior to the person furnishing proof of authority or evidence of entitlement as

prescribed by the ABCA. This subsection applies whether the notice was given

before or after the event which resulted in the person becoming entitled to the

share.

(4)



NON-RECEIPT



OF



NOTICES



20



If a notice or document is sent to a Shareholder, Director,

of the Corporation in accordance with subsection (1) and the

is returned on three consecutive occasions, the Corporation

give any further notice or documents to the person until that

Corporation in writing of the person's new address.

(5)



FAILURE



TO



GIVE



Officer or auditor

notice or document

is not required to

person informs the



NOTICE



The accidental failure to give a notice to a Shareholder, Director, Officer or

auditor of the Corporation, the non-receipt of a notice by the intended

recipient or any error in a notice not affecting its substance does not

invalidate any action taken at the meeting to which the notice relates.

(6)



EXECUTION



OF



NOTICES



Unless otherwise provided, the signature of any person designated by resolution

of the Board to sign a notice or document on behalf of the Corporation may be

written, stamped, typewritten or printed.

MADE by the Directors as

Director effective January 20,



evidenced

1995.



by



the signature of the following



/s/



Wade Cherwayko

--------------WADE G. CHERWAYKO



CONFIRMED by the Shareholders as evidenced by

following Shareholder effective January 20, 1995.

/s/



the



signature



of the



Wade Cherwayko

--------------WADE G. CHERWAYKO

21











EX-4.1

5



EXHIBIT 4.1

DESCRIPTION



OF



COMMON



STOCK



Abacan is authorized to issue an unlimited number of shares of common

stock, without par value (the "Common Stock"). Holders of Common Stock are

entitled to one vote per share on all matters submitted to a vote of

stockholders. They are entitled to receive dividends when and as declared by

the board of directors out of legally available funds and to share ratably in

the assets of Abacan legally available for distribution upon liquidation,

dissolution or winding up.

Holders of Common Stock do not have subscription, redemption or conversion

rights, nor do they have any preemptive rights. Holders of Common Stock do not

have cumulative voting rights. All stockholder action is taken by vote of a

majority of voting shares of the capital stock of Abacan present at a meeting of

stockholders at which a quorum existing of a majority of the issued and

outstanding shares of the voting capital stock is present in person or by proxy.

Directors are elected by a plurality vote.

For certain fundamental changes, the corporate legislation under which

Abacan was formed may require each class of outstanding stock to vote

separately.







EX-10.1

6



EXHIBIT



10.1

TERMINATION, SETTLEMENT

----------------------AND RELEASE AGREEMENT

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



Between

(1)



Amni International Petroleum Development Company Limited ("Amni")



(2)



Liberty Technical Services Limited ("Liberty")



Dated:



30



June



1998



Whereas



NOW

1.

The



(A)



Amni and Liberty are parties to the Joint Venture and Joint

Agreements relating to the Licences/Leases.



(B)



Various disputes having arisen between the parties, the parties have

now agreed to settle their disputes and to terminate their existing

arrangements and replace them with a new arrangement as set out

herein.



THEREFORE



it



is



agreed



as



Operating



follows:



Definitions

----------following



terms



shall



have



the



meanings respectively ascribed thereto:



DEEP ZONE

All geological formations within and around the IMA Field

that are north (upthrown) and south (downthrown) of the geological fault

dividing the IMA Field, all depths below the geological formation within the

IMA Field known as the sand, as currently shown on the maps and schematic

cross-section materials covering the IMA Field annexed hereto as Schedule B1 or

a depth of 12,150 feet (true vertical depth), whichever is the lesser depth,

lying within the geographical co-ordinates along the northern boundary of OML

112 and OPL 237, to the southern boundary of OML 112, to the western



boundary of OML 112 and to the eastern boundary of 550,000m E, annexed hereto as

Schedule B2.

EFFECTIVE



DATE



the



30th



day



of



June



1998



JOINT OPERATIONS

all operations relating to the IMA Field under

Licences/Leases other than operations commenced after the Effective Date that

relate to the Deep Zone

JOINT DEVELOPMENT

AGREEMENTS



the



agreements



listed



in



Schedule



A



hereto



IMA FIELD

The oil producing reservoir known as the IMA Field lying

within the Licences/Leases as shown on the plan attached as Schedule B@ hereto.

LICENCES/LEASES

Nigeria Oil Prospecting License 237, dated October 13, 1994

and Nigeria Oil Prospecting License 469, dated August 24, 1993, subsequently

converted to Oil Mining License 112 on February 12, 1998

2.



Termination of Joint Development Agreements

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



With effect from the Effective Date the Joint Venture and Joint Operating

Agreements are agreed by the parties to have ceased to be of any force or effect

and all rights, obligations and liabilities arising thereunder or in connection

therewith (whether in respect of the period prior to the Effective Date or



thereafter)

3.



are



deemed



to



be



canceled.



Assignment of Interests

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



Subject



to



any



necessary



government



consents



-2

(a)



4.



Liberty in consideration of the obligations undertaken by Amni

hereunder, hereby surrenders and assigns to Amni all of its right,

title and interest in the Licences/Leases and all associated equipment

located on the IMA Field and materials including 3D seismic data and

other geological and/or geophysical information acquired by or on

behalf of the joint ventures established pursuant to the Joint Venture

and Joint Operating Agreements with effect from the Effective Date

with the exception of (i) Liberty's interest in the Langley, (ii)

Liberty's existing rights to production from the IMA Field (or the

proceeds thereof) produced on or prior to the May 18, 1998 and (iii)

Liberty's rights in the insurance proceeds relating to the blowout of

the IMA 9 well, which proceeds shall be used to partially reimberse

the cost of the first well to be drilled in the Deep Zone, all as is

provided for in the Joint Operating Agreement attached as an Exhibit

to the Joint Venture Agreement and attached hereto as Schedule C.

Liberty shall procure that all data and information relating to Joint

Operations shall be released to Amni within 60 days of the date

hereof.



(b)



Amni hereby grants a 10% working interest in the Deep Zone to Liberty

(or its nominee) on the terms set out in the Joint Venture Agreement

attached hereto as Schedule C, which Joint Venture Agreement has been

executed on even date herewith.



(c)



With respect to the Joint Venture Agreement attached hereto and

documents executed in connection therewith (collectively, the "Deep

Zone Documents"), Amni and Liberty shall use their best efforts to

obtain the necessary governmental approvals required to consummate the

transaction provided therein as promptly as possible. If by December

1, 1998 the necessary government approvals have not been obtained,

then Amni and Abacan shall enter into such other

contractual

agreements as are necessary to provide Liberty (or its nominee) with

all of the rights and benefits provided for in the Deep Zone

Documents.



Waiver of Claims

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



Amni hereby waives all existing claims against and debts from Liberty, Abacan

Resource Corporation ("ARC") and all of its related subsidiaries, including, but

not limited to, Abacan Technical Services Ltd. (collectively, "Abacan") arising

under the terms of the Joint Venture and Joint Operating Agreements or in

respect of or in connection with Joint Operations. Liberty hereby waives (and

will procure that all of its affiliates also waive all existing claims) all

existing claims against Amni in respect of or in connection with the Joint

Operation and the Joint Venture and Joint Operating Agreements.

-3

5.

Governing Law

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



This Agreement shall be governed by, construed,

applied in accordance with the laws of England.



intrepreted



and



(b)



Any dispute arising out of and relating to this Agreement and which

the Parties have not settled by themselves, shall finally be decided,

to the exclusion of the courts, by arbitration in accordance with the

arbitration rules of the International Chamber of Commerce. Three

arbitrators shall be appointed, each party appointing one arbitrator,

and the two arbitrators thus appointed

choosing the presiding

arbitrator. In reaching a decision, the arbitrators shall act (ex

aequo et bono] and shall be guided by the terms of this Agreement and

international practice in similar agreements.



IN WITNESS whereof the Parties have caused this Agreement to be executed on the

date above written.



/s/ Tunde Afolabi

- ------------------for and on behalf of

AMNI INTERNATIONAL PETROLEUM

DEVELOPMENT COMPANY LIMITED



/s/ Tunde Folawiyo

- -------------------for and on behalf of

LIBERTY TECHNICAL SERVICES



LIMITED

-4-





SCHEDULE A



1.



Joint Venture Agreement for OPL 237 dated 2/12/94 as restated as at 15

September 1995 and the following related agreements of the same date

Joint Operating Agreement

Management Committee By-Laws

Technical Assistance Agreement



2.



Joint Venture Agreement for OPL 469 dated 19 August and restated as at 15

September 1995 and the following related agreements of the same date

Joint Operating Agreement

Management Committee By-Laws

Technical Assistance Agreement



3.



All other agreements entered into by and between Amni or its affiliates and

Abacan with respect to the foregoing agreements or relating to the

ownership and operation of the Joint Operations.

-5-





SCHEDULE B

THE IMA FIELD

------------Please



see Schedule AD@ of the Joint Venture Agreement filed as Exhibit 10.3 to



the



Form



10-KSB



dated



effective



March



1,



1999.



-6

SCHEDULE C

DRAFT JOINT VENTURE AGREEMENT

----------------------------The finalized Joint Venture Agreement has been filed as Exhibit 10.3 to the Form

10-KSB dated effective March 1, 1999.

-7

SUPPLEMENTAL AGREEMENT TO TSRA DATED JUNE 30, 1998



Date:

- ----



June



30,



1998



We refer to the TSRA being signed today between us. Notwithstanding the terms

of such Agreement, the parties hereby agree that the issue of termination of the

JVA/JOA remains outstanding.

Accordingly, the parties hereby undertake to negotiate a termination clause in

good faith as soon as reasonably practicable hereafter (and in any event not

later than seven days from the date hereof) along the following principles:

1.



Termination will be permissible if either party fails to pay any sums due,

whether as a result of default, insolvency, liquidation or receivership.



2.



The default may be remedied

someone on his behalf.



3.



If it is not remedied within such

terminate the JVA/JOA forthwith.



4.



Upon any such termination the terminating party will be compensated for the

value of its interest in the project net of the cost of curing the default.



within a 60-90 day period by the

period,



the



defaulter or



non-defaulting



party may



Agreed:/s/ Tunde Folawiyo

Agreed:/s/ Tunde Afolabi

-------------------------------------Liberty Technical Services Ltd.

Amni International Petroleum

Development Company Limited

-8







EX-10.2

7



EXHIBIT



10.2



TERMINATION. SETTLEMENT

----------------------AND RELEASE SUPPLEMENTAL AGREEMENT

---------------------------------Between

(1)



Amni International Petroleum Development Company Limited ("Amni")



(2)



Liberty Technical Services Limited ("Liberty")



Dated:



June



1998



Whereas

This



NOW

1.



Supplemental



Agreement



is



supplemental



to:



(A)



a Termination, Settlement and Release Agreement relating to the

Licences/Leases ("TSRA") whereby (inter alia) Liberty's existing

interest is exchanged for a ten per cent. (10%) Working Interest in

the Deep Zone



(B)



As part of such arrangement the parties have also respectively

to various other terms and conditions as set out herein.



THEREFORE



it



is



agreed



as



agreed



follows:



Definitions

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



All terms defined in the TSRA shall have the same meaning

in this Supplemental Agreement;



(b)



The following term shall have the meaning ascribed thereto:



Langley



where used



the Mobile Offshore Production Unit all as more fully described

in the Assignment and Bill of Sale attached hereto as Schedule B



2.

Amni and Liberty shall provide Total International Limited ("Total") with

irrevocable written instructions related to the disbursement of revenues

attributable to the lift to be completed by Total on or about June 22nd, 1998

which shall include an instruction to pay Liberty $750,000 in the form of

Schedule D in respect of all amounts owing to Liberty in respect of general and

administrative costs and operating costs.

3.

Contemporaneously with this Agreement and in consideration of Sedco Forex

("Sedco") and Schlumberger Overseas S.A. ("Schlumberger") forgiving all of the

Liberty/Amni indebtedness to Sedco and Schlumberger pursuant to the Agreement in

the form attached as Schedule A, Liberty shall enter into an Assignment and Bill

of Sale with regard to the Langley in favour of Sedco in the form attached as

Schedule B whereby all of the respective rights title and interest of Liberty to

the Langley are transferred to Sedco. In contemplation of the foregoing

assignment. Amni hereby waives for the benefit of Liberty any rights claims or

interests it may have in respect of the Langley.



4.

Existing Creditors ---------------------Amni hereby agrees to indemnify, and hold harmless Liberty, (which for the

purpose of this clause shall include all of its past and present administrators,

affiliates, agents, assignees, attorneys of record, directors, employees,

officers, partners, predecessors, receivers, shareholders, subsidiaries,

successors and trustees ("Indemnified Parties")) from and against any and all



liabilities, including without limitation attorneys' fees, damages, fines, out

of pocket costs, penalties, and related costs of experts ("Indemnified

Liabilities") arising from, based on, related to or associated with the Joint

Development and Joint Operating Agreements or Joint Operations listed in

Schedule C attached hereto (the "Joint Development Claims"). Further, Amni

hereby assumes the payment of the Joint Development Claims but not further or

otherwise. As soon as reasonably possible Amni shall offer to all holders of

Joint Development Claims a mechanism whereby a proportion of revenues arising

from WA Field, including if necessary, a portion of the revenues attributable to

Amni's interest in the Deep Zone are made available so that all current Joint

Development Claims are promptly met when due and accrued Joint Development

Claims are paid over an agreed pen' od. In return Amni shall require each Joint

Operations Claim holder accepting any payment from Amni to waive all claims

against Liberty. No payments of any kind shall be made by Amni to the holder of

any Joint Development Claims unless such holder first releases Liberty in

writing from any liability with respect to the Joint Development Claims. In the

event any claim or threatened claim is made by any such creditor against

Liberty, Amni shall be promptly notified of such claim or threatened claim and

shall be given full control over the conduct of any proceedings in relation

thereto provided Amni (i) assumes in writing full responsibility for all claims

raised in such proceedings and (ii) properly defends such proceedings. Amni

shall keep Abacan apprised of the status of all such proceedings. Neither

Liberty, Amni nor any of their affiliates shall make any admissions in respect

of any such proceedings that could have an adverse effect on the other party

without the consent of such party. Liberty shall cooperate fully with Amni (at

Amni's request and cost) in any such proceedings and shall procure that its

affiliates also cooperate (on the same basis).

5.



Pool Account

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



Notwithstanding anything in the TSRA to the contrary, Liberty reserves all of

its rights in the Royalties and Tax pool account ("Pool Account"). At such time

as the actual Excess Profit Tax is determined with respect to the 1998 Joint

Operations, Amni shall pay to Liberty its share of any amount 'in the Pool

Account on the Effective Date that is in excess of the actual amounts due and

owing to the Nigerian Government with respect to the Excess Profit Tax for the

period up to and including the Effective Date.

6.



Governing, Law

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



(a)

This Agreement shall be governed

accordance with the laws of England.



by,



construed



and interpreted in



(b)

Any dispute arising out of and relating to this Agreement and which the

Parties have not settled by themselves, shall finally be decided, to the

exclusion of the courts, by arbitration in accordance with the arbitration rules

of the International Chamber of Commerce. Three arbitrators shall be appointed,

each party appointing one arbitrator, and the two arbitrators thus appointed

choosing the presiding arbitrator. In reaching a decision, the arbitrators shall

act (ex aequo et bono) and shall be guided by the terms of this Agreement and

international practice in similar agreements.



7.

Notices

------All notices, requests, demands, or other communications hereunder shall be

delivered by hand or sent by mail as appropriate or by facsimile, telex or

telegram to the Parties at the address provided below:

Owner/Operator:



Amni International Petroleum Development

Plot 1377B Tiamiyu

Savage Street

Victoria Island, P.O. Box 54452

Falomo, Ikoyi

Fax: 011 234 262 1526

Attn:

Tunde J Afolabi

Managing Director



Company



Limited



Liberty:

ABACAN RESOURCE CORPORATION

Suite 140

14811 St Mary's Lane

Houston, Texas 77079

USA

Fax: (281) 721 0560

Attn: Timothy Stephens

With



a



copy



to:



Liberty Technical Services

38 Warehouse Road

Apapa, Lagos, Nigeria

Attn: Wade Cherwayko



Ltd



IN WITNESS whereof the Parties have caused this Agreement to be executed on the

date above written



/s/ Tunde Afolabi

- ------------------for and on behalf

AMNI INTERNATIONAL PETROLEUM

DEVELOPMENT COMPANY LIMITED



Tunde Folawiyo

- --------------for and on behalf of

LIBERTY TECHNICAL SERVICES



LIMITED





SCHEDULE A

Agreement for Transfer of the Langley

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

SCHEDULE B

Assignment and Bill of Sale

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

SCHEDULE C



Joint Development Claims

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



NAIRA

$US



PAYABLES

PAYABLES



GRAND

US



($U.S.)

($U.S.)



TOTAL



DOLLAR



PAYABLE



Pay



]



[

]

--------------------------[



]



(U.S.)



LISTING



Company Name



Acct.



[



Concessions

----------IMA FIELD

$



Total

----------------=================



In addition to the claims set on the preceding pages, Amni will also assume

responsibility for the following lawsuit and future lawsuits relating to the

claims referenced on this Schedule C. Notwithstanding anything in the Agreement

to the contrary, such assumption shall not be subject to any dollar limitations

set forth in the Agreement or this Schedule C.

1.



Cause No. 98-24830; Weatherford Enterra U.S., Limited Partnership v. Abacan

Resource Corporation, Abacan Services (USA) Corporation, Abacan Technical

Services, Ltd., Abacan Resources (Nigeria), Ltd. and Liberty Technical

Services, Ltd. filed on May 27, 1998 in the 61st Judicial District Court of

Harris County, Texas ("Weatherford Lawsuit").



In addition, Amni has and hereby assumes any liabilities due and owing to the

creditors described on the preceding pages that arises after May 18, 1998.

Notwithstanding anything in the Agreement to the contrary, such assumption shall

not be subject to any dollar limitations set forth in the Agreement or this

Schedule C.









EX-10.3

8



EXHIBIT



10.3

JOINT VENTURE AGREEMENT

BETWEEN



AMNI INTERNATIONAL

PETROLEUM DEVELOPMENT COMPANY LIMITED

AND

LIBERTY TECHNICAL SERVICES LTD. ,



REGARDING THE DEEP

ZONES OF THE IMA FIELD



JUNE 30, 1998



THIS JOINT

between:



VENTURE



AGREEMENT



is



made



effective



as of June 30, 1998 by and



AMNI INTERNATIONAL PETROLEUM DEVELOPMENT

COMPANY LIMITED, of Plot 1377 B Tiamiyu Savage Street,

Victoria Island, P.O. Box 54452, Faloma Ikoyi, Lagos, Nigeria,

(hereinafter referred to as the AOwner/Operator@)

and

LIBERTY TECHNICAL SERVICES LTD. ,,

Folawiyo Plaza, 38 Warehouse Road,

referred to as "Liberty")



of 7th Floor,

Lagos, Nigeria,



(hereinafter



WHEREAS:

(a)



The Owner/Operator and Liberty elected to establish a joint venture for the

exploration and development of Concession Block 469 pursuant to the terms

of the Joint Venture Agreement (Restated) dated August 19, 1993 and

Restated at September 15, 1995.



(b)



The Owner/Operator and Liberty elected to establish a joint venture for the

exploration and development of Concession Block 237 pursuant to the terms

of the Joint Venture Agreement (Restated) dated December 2, 1994 and

Restated at September 15, 1995.



(c)



Owner/Operator and Liberty have elected to terminate the Joint Venture

Agreements referenced in the preceding paragraphs and now desire to

establish a joint venture for the exploration and development of the Deep

Zones of the IMA Field, subject to and in accordance with the terms hereof.



NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter

set forth, the Parties hereby agree as follows:

ARTICLE I - DEFINITIONS AND INTERPRETATION

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



1.1

In this

following words

opposite them:



Agreement, the recitals and schedules attached hereto, the

and expressions shall have the meanings respectively set



"ACCOUNTING PROCEDURE" means the accounting procedure attached to and forming

part of the Joint Operating Agreement.



"AFFILIATE" means a company, partnership or other legal entity which controls,

or is controlled by, or which is controlled by an entity which controls a Party,

and for the purpose hereof, "control" means the ownership directly or indirectly

of more than fifty (50%) percent of the shares or voting rights or privileges in

a company, partnership or legal entity.

"AGREEMENT" "hereof", "herein", "hereto" and similar expressions means this

Joint Venture Agreement together with the schedules attached hereto and any

amendment or amendments made between the Parties in writing from time to time.

"COMMERCIAL QUANTITIES" means Petroleum in such commercial quantities which, in

the opinion of the Parties and to the satisfaction of the Minister, are

sufficient to entitle the Parties to commence production.

"CONCESSION BLOCK 237" means the surface area delineated in OPL 237 details of

which are more particularly described in the survey plan annexed to OPL 237, as

such area may vary from time to time during the term of OPL 237 and any

extensions thereto or any oil mining leases arising therefrom.

"DEEP ZONES" means all geological formations within and around the IMA Field

that are north (upthrown) and south (downthrown) of the geological fault

dividing the IMA field, all depths below the geological producing reservoir

within the IMA Field, known as the AF@ sand, as currently shown on the maps and

schematic cross-section materials covering the IMA Field, which are attached as

Schedule AD@ to the Joint Venture Agreement between Amni International Petroleum

Company Limited and Liberty Technical Services Ltd, of even date herewith, lying

within the geographical co-ordinates along the northern boundary of OML 112 and

OPL 237, to the southern boundary of OML 112, to the western boundary of OML 112

and to the eastern boundary of 550,000 meters East, as reflected on the maps of

the IMA Field attached to the Joint Venture Agreement.

"EFFECTIVE



DATE"



means



the



30th



day



of



June,



1998.



"GOVERNMENT" means the federal government of the federal republic of Nigeria as

represented by the Ministry of Petroleum Resources.

"IMA FIELD" means the area reflected on Schedule D, which area is contained

within Concession Block 469 as delineated in Nigeria Oil Prospecting License

469, dated August 24, 1993, subsequently converted to Oil Mining License 112 on

February 18, 1998 and Concession Block 237

"JOINT OPERATING AGREEMENT" OR "JOA" means the joint operating agreement that

governs Joint Operations on the Deep Zones of the IMA Field, and which JOA is

annexed hereto as Schedule "C".



"JOINT OPERATIONS" means the entire process of acquiring, exploring for,

developing, exploiting, producing and selling Petroleum from the Deep Zones of

the IMA Field for the joint account of the Parties hereto.

"LIBERTY"

"MINISTER"



means



means



"MINISTRY" means

federal republic



the



Liberty

Minister



Technical

of



the



Services



Ltd.



Ministry.



the Ministry of Petroleum Resources of the government of the

of Nigeria.



"OIL MINING LEASE 112" or "OML 112" means the oil mining lease that was issued

by the Ministry to the holder of OPL 469 on February 18, 1998 and includes (a)

all rights, title and interest granted thereunder, including any extension,

renewal or amendment thereof made in writing, and (b) all schedules and plans

attached thereto or referred to therein pursuant to which the Owner/Operator has

acquired an interest in all Petroleum found and produced within the geographic

area defined and described therein including the right to prospect for, take and

remove and sell any petroleum.

"OIL PROSPECTING LICENCE NO. 237" or "OPL 237" means Oil Prospecting Licence No.

237 issued by the Minister to the Owner/Operator on December 22, 1994, and

includes (a) all rights, title and interest granted thereunder, including any

extension, renewal or amendment thereof made in writing, and (b) all schedules

and plans attached thereto or referred to therein pursuant to which the

Owner/Operator has acquired an interest in all Petroleum found and produced

within the geographic area defined and described therein including the right to

prospect for, take and remove and sell any petroleum.

"OWNER/OPERATOR" means Amni International Petroleum Development Company Limited

of Lagos, Nigeria.

"PARTICIPATING INTEREST" means the undivided interest of each Party, expressed

as a percentage, in the rights, benefits and obligations established by this

Agreement, as set forth and described in Article VI.

"PARTIES"

"PARTY"

assigns



means



collectively



the



Owner/Operator



and



Liberty.



means any one party to this Agreement and any permitted successors or

in accordance with the provisions of this Agreement.



"PETROLEUM" means all mineral oil (or any related hydrocarbons), natural gas as

it exists in its natural strata (including condensate, sulphur and any and all

other liquid and gaseous hydrocarbons) and does not include coal or bituminous

states or other stratified deposits from which oil can be extracted by

destructive distillation.



"PETROLEUM COSTS" means those reasonable costs, claims and expenses incurred by

the Operator of the JOA, from time to time on or after the Effective Date, both

within and outside of Nigeria, directly related to exploration, development and

production of Petroleum from the Deep Zones of the IMA Field that have been

properly incurred pursuant to the terms of the JOA.

"PRODUCTION



DATE"



means



the



date



that



continuous



Production



commences.



"TAX OIL" means thirty percent (30%) of the total production of Petroleum from

the Deep Zones of the IMA Field which shall be held pursuant to an arrangement

acceptable to the parties hereto pursuant to which the Government will be paid

all royalties, petroleum profits taxes and other taxes and governmental levies

due and owing with respect to Joint Operations.

1.2



Appended



Schedule

Schedule

Schedule

Schedule

Schedule



"A"

"B"

"C"

"D"

"E"



All schedules

Agreement.

1.3

with



hereto



referred



are



the



following



schedules:



OML 112 and related correspondence from the Ministry

OPL 237 and related correspondence from the Ministry

Joint Operating Agreement

Map of IMA Field

Scheduled Litigation

to



above



are incorporated into and form part of this



Wherever any provision of any schedule to this Agreement conflicts

any provision in the body of this Agreement, the provisions of the body of



this Agreement shall prevail. Reference herein to a schedule shall mean a

reference to a schedule to this Agreement. References in any schedule to the

Joint Venture Agreement shall mean a reference to this Agreement.

1.4



Time



shall



be



of



the



essence



hereof.



1.5

The division of this Agreement into headings, sections,

subsections, clauses, subclauses, and paragraphs and the provision of headings

herein is for the convenience of reference only and shall not affect the

interpretation of this Agreement.

1.6

include

1.7

lawful



the



In this Agreement, where the context requires, the singular shall

plural and the plural shall include the singular.



money



All references to currency, unless otherwise specified, are to

of the United States of America.





ARTICLE II - SCOPE

-----------------2.1

The Parties hereby undertake and agree subject to the conditions

hereof, to associate and participate together in a joint venture to explore for,

develop, exploit, produce and sell Petroleum from the Deep Zones of the IMA

Field and to conduct Joint Operations thereon. The joint venture shall

establish and maintain facilities for the conduct of the Joint Operations.

ARTICLE III - CONTINUED OPERATIONS

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

The Owner/Operator shall continuously maintain OPL 237 and OML

112 in good standing throughout the term of this Agreement (and shall provide

confirmation respecting same to Liberty upon written request) in order to secure

the respective Participating Interests in Petroleum produced from the IMA Field

ARTICLE IV - JOINT OPERATIONS

----------------------------4.1

Field



shall



The

be



conduct of all Joint Operations on the Deep Zones of the IMA

in accordance with the terms of the Joint Operating Agreement.

ARTICLE V - UNDIVIDED INTEREST

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



5.1

At such time as the Oil Mining Lease relating to OPL 237 is issued

by the Government, Owner/Operator shall convey to Liberty a 10% undivided

interest in the Oil Mining Lease, but only with respect to the Deep Zones.

ARTICLE VI - PARTICIPATING INTEREST OF PETROLEUM COSTS

-----------------------------------------------------6.1

carried



out



All

in



Petroleum Costs

respect of the



Owner/Operator

Liberty



incurred in respect of Joint Operations

IMA Field, shall be allocated as follows:

90%

10%



6.2

All equipment, material or property of whatsoever nature related

to the conducting of Joint Operations within the Deep Zones of the IMA Field

(other than equipment or property that is leased from third parties or supplied

by only one party, both in accordance with the terms of the JOA) and any other

assets acquired by the Parties pursuant to the terms of this Agreement from time

to time shall be owned by the Parties in accordance with their respective

Participating Interest.



6.3

in ARTICLE



The

6.1



allocation of Petroleum Costs between the Parties as set forth

herein constitutes that Party's Participating Interest.





6.4

Each of the Parties hereby covenants to contribute and/or pay the

Petroleum Costs in the amount equal to its Participating Interest, from time to

time, and to bear all Petroleum Costs paid or incurred pursuant to this

Agreement on behalf of such Party or Parties in portions equal to their

Participating Interest, all as shall be more fully provided in the Joint

Operating Agreement.

6.5

Any net tax credits, royalty credits or reduction in Tax Oil

generated by or resulting from or arising in connection with the Joint

Operations carried out within the Deep Zones of the IMA Field shall be shared

and allocated based on each Party=s Participating Interest.

ARTICLE VII - PARTICIPATING INTEREST OF PRODUCTION

-------------------------------------------------7.1

The Owner/Operator hereby acknowledges and confirms that Liberty

is entitled to its Participating Interest of Petroleum produced from the Deep

Zones of the IMA Field as set forth in Paragraph 7.2 below.

7.2

All benefits, revenues and receipts of whatsoever nature as same

relate to the sale of Petroleum produced from the Deep Zones of the IMA Field

shall be allocated as follows:

The

As

be



Tax



Oil



shall



be



reserved



for



ultimate



payment



to



the



to the remainder: Owner/Operator shall be entitled to 90% and

entitled to 10%.



Government

Liberty shall



7.3

In the event the Government elects to exercise its right to

participate in the development of the Deep Zones of the IMA Field, the

Participating Interest of the Parties will be amended accordingly, on a pro rata

basis, based upon the level of Government participation.

ARTICLE VIII - ASSIGNMENT

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

This Agreement and all the provisions hereof shall be binding

upon and enure to the benefit of the Parties hereto and their respective

successors and assigns but neither this Agreement not any of the rights,

interest or obligations hereunder or under OML 112, OPL 237 or in respect of the

IMA Field shall be assigned or pledged by any Party without the prior written

consent of the other Party, which consent shall not be unreasonably withheld,

and the Government, if necessary, but may be assigned to Affiliates without such

consent subject to the provisions of this Agreement. Further, Owner/Operator

hereby consents to a pledge by Liberty to of its interests in this Joint Venture

and in the Deep Zones of the IMA Field to financial institutions now or

hereafter providing credit to Liberty.



8.2

The Parties acknowledge that the termination of the Joint

Ventures as referenced in Paragraph (c) of the recitals is subject to

Governmental approval. The Parties agree to obtain such approvals as promptly

as possible. Further, the Parties acknowledge that the interests herein

conveyed to Liberty with respect to its 10% undivided interest in the Deep Zone

is subject to obtaining all necessary governmental approvals required to

consummate the transactions provided for herein. The Parties agree to obtain



such approvals as promptly as possible. If by December 1, 1998 the necessary

government approvals have not been obtained, then the Parties shall enter into

such amendments to this Agreement and such other contractual agreements as are

necessary to provide Liberty (or its nominee) with all of the rights and

benefits that were to be provided to Liberty pursuant to this Agreement and the

Agreements executed in connection herewith.

ARTICLE IX

JOINT OPERATING AGREEMENT

------------------------9.1

The Parties hereto agree that the Joint Operations within the Deep

Zones of the IMA Field shall be conducted in accordance with the provisions of

the Joint Operating Agreement.

9.2

The Owner/Operator is hereby designated as Operator for the

conduct of all Joint Operations carried out within, upon or under the IMA Field.

9.3

The Parties hereby adopt, approve and agree to abide and be bound

by the terms of the Joint Operating Agreement in the form attached hereto as

Schedule "C."

9.4

All Joint Operations upon the Deep Zones of the IMA Field shall be

carried out in accordance with the provisions of the Joint Operating Agreement

and Accounting Procedure.

ARTICLE X - DISPUTE RESOLUTION

-----------------------------10.1

applied



in



This Agreement shall be governed by, construed, interpreted and

accordance with the laws of England.



10.2

Any dispute arising out of and relating to this Agreement and which

the Parties have not settled by themselves, shall finally be decided, to the

exclusion of the courts, by arbitration in accordance with the arbitration rules

of the International Chamber of Commerce. Three arbitrators shall be appointed,

each party appointing one arbitrator, and the two arbitrators thus appointed

choosing the presiding arbitrator. In reaching a decision, the arbitrators

shall be guided by the terms of this Agreement and international practice in

similar agreements.



ARTICLE XI - TERM

----------------11.1

This Agreement shall remain in full force and effect and shall

continue to be binding upon the Parties hereto until terminated by the unanimous

written consent of the Parties.

ARTICLE XII - FINANCIAL YEAR

---------------------------12.1

or such



The financial year end of the joint venture shall be December 31

other date as agreed in writing by the Parties hereto.



12.2

The financial books and records of the joint venture shall be

kept in accordance with generally accepted accounting principles and procedures.

12.3

Subject to the terms of the Joint Operating Agreement, an annual

audit of the joint venture's balance sheet, profit and loss statement and other

related financial records shall be made by a recognized public accounting or



chartered accounting firm, which is mutually agreeable to the Parties hereto.

The Parties shall be entitled to have members of its internal audit staff

inspect the records and books of the joint venture at any time and at its own

expense. In addition, either Party may, at its sole expense, engage an

independent public accounting or chartered accounting firm to audit the

financial records of the joint venture from time to time.

ARTICLE XIII - CONFIDENTIALITY

-----------------------------13.1

The Parties covenant and agree that they are entering into a

joint venture relationship and, subject to Article 13.3, owe each other the

highest level of fiduciary responsibility and, except as permitted in Article

13.2, will not while Parties to this Agreement or for a period of five year

following the expiry of this Agreement, disclose to any other person, firm,

corporation or entity, any proprietary or confidential information obtained in

the course hereof, or as a result of the Joint Operations contemplated in this

Agreement. Any information not generally available to the public shall be

construed as proprietary or confidential for the purposes of this Agreement

including, without limitation, information relating to Joint Operations, seismic

and other data, drilling techniques and results, technology, suppliers of

equipment, and names of customers, information relating to sales, markets,

target markets, strategies, advertisements, business procedures and all

financial information.

13.2

The obligation of the Parties as set forth in Article 13.1

hereof to maintain confidentiality shall not apply to such knowledge,

information, material or business data obtained pursuant to this Agreement or

relating to any material to the joint venture which:



(a)



was demonstratably

Agreement;



known to a Party prior to December 2, 1994 of this



(b)



is available to the public in the form of written

by a third party;



publication



issued



(c)



shall have become available to the Parties in good faith from a third

party who has a bona fide right to disclose same;



(d)



is required to be disclosed to any federal, provincial, state or local

government or governmental branch, board, agency or instrumental

mentality in order to comply with applicable laws, or is required to

be disclosed to regulatory authorities including stock exchanges

having jurisdiction in respect of securities of either parties;



(e)



is required to be disclosed by a Party pursuant to public disclosure

requirements imposed under applicable securities legislation;



(f)



is required or desired to be disclosed to a Party's financial

advisors, banks, contractors or potential investors in the project.



13.3

Each Party shall have the right to independently engage in and

receive full benefits from other business activities, whether or not

competitively with the joint venture hereby created, without consulting the

other Party, and no Party shall have any obligation to the other Party with

respect to any opportunity to acquire any assets at any time outside the terms

of the joint venture hereby constituted.

ARTICLE XIV - COVENANTS

----------------------14.1



The



Owner/Operator



covenants



with



Liberty



as



follows:



(a)



the Owner/Operator is a company duly incorporated, validly existing

and in good standing under the laws of the Federal Republic of Nigeria

and that it has all necessary corporate powers to enter into this

Agreement and to carry on business herein contemplated;



(b)



the Owner/Operator is the lawful licensee of OPL 237 and lawful lessee

of OML 112 and the geographic area contained therein, and the

Owner/Operator has not transferred, conveyed, sold or in any way

encumbered its interest as licensee of OPL 237 or OML 112;



(c)



the form of oil mining lease called Oil Mining Lease No. 112 (which is

attached hereto as Schedule "A") is, to the best of the knowledge and

belief of the

Owner/Operator,

the present and subsisting oil

prospecting licence for the geographic area contained therein, and OML

112 is in good standing as to the Government and all other regulatory

agencies and authorities;;





(d)



the form of oil prospecting licences called Oil Prospecting Licence

No. 237 (which is attached hereto as Schedule "B") is, to the best of

the knowledge and belief of the Owner/Operator, the present and

subsisting oil prospecting licence for the geographic area contained

in Concession Block 237, and OPL 237 is in good standing as to the

Government and all other regulatory agencies and authorities



(e)



During the term of this Agreement Owner/Operator shall ensure that all

requirements imposed by the Government and necessary to maintain OML

112, OPL 237 and, if issued, the Oil Mining Lease are timely

satisfied. Any costs incurred by the Owner/Operator in satisfying such

operations as they relate to the Deep Zone shall comprise part of the

Petroleum Costs



(f)



the Owner/Operator shall assist in the promotion and successful

conduct of the joint venture including obtaining and providing Liberty

with (1) all necessary Government and other approvals required to

perform the Joint Operations, and (2) if requested by Liberty, any

material correspondence or other documentation hereafter filed or

prepared for filing with the Government by the Owner/Operator that

relates to the IMA Field;



(g)



The Owner/Operator shall provide or shall procure all necessary

technical and operational support for the conduct of the Joint

Operations as required from time to time pursuant to the terms of this

Agreement and the Joint Operating Agreement and shall conduct its

activities in accordance with good oil field practices; and



(h)



The Owner/Operator shall refrain from entering into any amendments to

or modifications of the documents establishing OML 112 or OPL 237

without the consent of Liberty,

which

consent

shall not be

unreasonably withheld.



14.2



Liberty



covenants



as



follows:



(a)



Liberty is a corporation duly incorporated, validly existing and in

good standing under the laws of the Bahamas and has all necessary

corporate powers to enter into this Agreement and to conduct and to

carry on business as herein contemplated;



(b)



Except for the pledge of its interest in the Deep Zone to the

Owner/Operator and to Total International Limited and Credit Suisse

First Boston, Liberty has not transferred, conveyed, sold or in any

way encumbered its interest in the Deep Zone; and





(c)



(d)



Liberty shall assist in the promotion and successful conduct of the

joint venture including obtaining and providing the Owner/Operator

with if requested by the Owner/Operator, any material correspondence

or other documentation hereafter filed or prepared for filing with the

Government by Liberty that relates to the IMA Field; and

Except as set on Schedule E attached hereto, there are no pending

litigation, bankruptcy, insolvency, or similar proceedings that will

affect Liberty=s ability to perform its obligations hereunder.



ARTICLE XV -DEFAULT

------------------15.1

If any Party ("Defaulting Party") fails to comply with the terms

of this Agreement, the other Party hereto ("Non-Defaulting Party") shall have

the right to serve on the Defaulting Party a formal notice (a "Default Notice"),

which notice shall specify in reasonable detail the events causing such default.

If such default continues for more than thirty (30) days after the date of

notification, then until such time as the Defaulting Party has remedied its

default in full, the Defaulting Party=s rights and remedies under this Agreement

shall be suspended.

15.2

The remedies provided in Article 15.1 shall be without prejudice

to any other rights available to the Non-Defaulting Party whether at common law,

pursuant to statute or otherwise.

ARTICLE XVI - MISCELLANEOUS

--------------------------16.1

executed



by



This Agreement

the Parties.



may



be



amended



only



by



a written



instrument



16.2

written,



This Agreement supersedes any and all other agreements, oral or

among the Parties in respect of the subject matter contained herein.



16.3

Each of the Parties shall execute and deliver such other

certificates, agreements and other documents and take such other actions as may

reasonably be required by the other Party in order to consummate or implement

the transactions contemplated by this Agreement.

16.4

The liability and obligation of the Parties hereto shall be

several and not joint or collective and each Party shall be responsible only for

its obligations as herein set forth. It is expressly declared that it is not

the purpose of this Agreement to create any partnership or syndicate and neither

this Agreement nor the operations hereunder shall be construed or considered as

creating any partnership or syndicate.

16.5

All notices, requests, demands, or other communications hereunder

shall be delivered by hand or sent by mail as appropriate or by facsimile, telex

or telegram to the Parties at the address provided below:



Owner/Operator:

Amni International Petroleum Development

Company Limited

Plot 1377B Tiamiyu

Savage Street

Victoria Island. P.O. Box 54452



Falomo, Ikoyi

Fax: 011 234 262 1526

Attn: Tunde J. Afolabi

Managing Director

Liberty:

Liberty Technical Services Ltd.

Suite 140

14811 St. Mary=s Lane

Houston, Texas 77079

U.S.A.

Fax: (281) 721 0560

Attn: Timothy Stephens

With a copy to:

Liberty Technical Services Ltd.

38 Warehouse Road

Apapa, Lagos, Nigeria

Fax: 011 234 1545 0301

Attn: Wade Cherwayko

Any Party may from time to time change its address for service hereunder

upon written notice to the other Party. Any notice may be served by

personal delivery or by mailing the same by registered post, in a properly

addressed envelope addressed to the Party to whom such notice is to be

given at its address for service hereunder and shall be deemed to be

received forty-eight (48) hours after the delivery thereof. Any notice may

be served by prepaid telegram, telex or telecopy addressed to the Party to

whom such notice is to be given and any such notice so served shall be

deemed to be given and received by the addressee eighteen (18) hours after

the time of delivery.

16.6

This Agreement may be executed in one or more counterparts and

evidence by facsimile copy thereof and all such counterparts or facsimile copies

together shall constitute one and the same agreement.



IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by

their duly authorized officers and representatives as of the day and year first

written above.

AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED

Per: /s/ Tunde Afolabi

------------------Title: Managing Director

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



LIBERTY TECHNICAL

SERVICES LTD.

Per: /s/ Wade Cherwayko

------------------Title:





THIS IS SCHEDULE "A" TO THE JOINT VENTURE AGREEMENT MADE EFFECTIVE AS OF JUNE

30, 1998 BY AND BETWEEN AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED

AND LIBERTY TECHNICAL SERVICES LTD.

OIL MINING LEASE 112





THIS IS SCHEDULE "B" TO THE JOINT VENTURE AGREEMENT MADE EFFECTIVE AS OF JUNE

30, 1998 BY AND BETWEEN AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED

AND LIBERTY TECHNICAL SERVICES LTD.

OIL PROSPECTING LICENCE NO. 237





THIS IS SCHEDULE "C" TO THE JOINT VENTURE AGREEMENT MADE EFFECTIVE AS OF JUNE

30, 1998 BY AND BETWEEN AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED

AND LIBERTY TECHNICAL SERVICES LTD.

OPERATING AGREEMENT AND ACCOUNTING PROCEDURE



Means the operating

Parties with respect to



agreement executed on even date herewith between the

the Deep Zones of the IMA Field.





THIS IS SCHEDULE "D" TO THE JOINT VENTURE AGREEMENT MADE EFFECTIVE AS OF JUNE

30, 1998 BY AND BETWEEN AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED

AND LIBERTY TECHNICAL SERVICES LTD.



MAP OF THE IMA FIELD



[MAP OF THE IMA FIELD]



IMA FIELD, OML 112 (FORMERLY OPL 469) ) AND OPL 237

- ------------------------------------------------------------DEEP



ZONES:



All geological formations within and around the Ima Field that are north

(upthrown) and south (downthrown) of the geological fault dividing the Ima

Field, all depths below the geological producing reservoir within the Ima Field,

known as the * F + sand, as currently shown on the maps and schematic

cross-section materials covering the Ima Field annexed hereto as Schedule A, or



a depth of 12,150 feet (true vertical depth), whichever is the lesser depth,

lying within the geological co-ordinates along the northern boundary of OML 112

and OPL 237, to the south boundary of OML 112, to the western boundary of OML

112 and to the eastern boundary of 550,000m E, as annexed hereto as Schedule B.



THIS IS SCHEDULE "E" TO THE JOINT VENTURE AGREEMENT MADE EFFECTIVE AS OF JUNE

30, 1998 BY AND BETWEEN AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED

AND LIBERTY TECHNICAL SERVICES LTD.



SCHEDULE OF PENDING LITIGATION

1.



Cause No. 98-24830; Weatherford Enterra U.S., Limited Partnership v. Abacan

Resource Corporation, Abacan Services (USA) Corporation, Abacan Technical

Services, Ltd., Abacan Resources (Nigeria), Ltd. and Liberty Technical

Services, Ltd. filed on May 27, 1998 in the 61st Judicial District Court of

Harris County, Texas (AWeatherford Lawsuit@).



2.



Cause No. 98-20214; Global Marine International Services Corporation v.

Abacan Technical Services Limited filed on April 28, 1998 in the 125th

Judicial District Court of Harris County, Texas











EX-10.4

9



EXHIBIT



10.4



JOINT OPERATING AGREEMENT

BETWEEN

AMNI INTERNATIONAL PETROLEUM DEVELOPMENT

COMPANY LIMITED



AND



LIBERTY TECHNICAL SERVICES LTD.



REGARDING THE DEEP

ZONES OF THE IMA FIELD









TABLE OF CONTENTS

ARTICLES

PAGE

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



ARTICLE I - DEFINITIONS

1

1.1 Definitions

1

1.2 Schedules

9

1.3 Interpretation

9

ARTICLE II - DURATION

10

2.1 Effective Date and Term

10

2.2 Continuing Obligation

10

ARTICLE III - SCOPE AND UNDERSTANDING

10

3.1 Scope

10

3.2 Understanding

11

ARTICLE IV - PARTICIPATING INTEREST

11

4.1 Participating Interest

11

4.2 Ownership, Obligations and Liabilities Governed by Joint Venture Agreement

11

ARTICLE V - THE OPERATOR

11

5.1 Designation of the Operator

11

5.2 Resignation or Removal of the Operator

11

5.3 Removal of the Operator

12

5.4 Appointment of Successor

12

5.5 Commingling of Funds

13

ARTICLE VI - AUTHORITY AND DUTIES OF THE OPERATOR

13

6.1 Rights

13

6.2 Responsibility

14

6.3 Liens and Encumbrances

15

6.4 Employees and Contractors



15

6.5

16

6.6

16

6.7

16

6.8

17

6.9

17

6.10

18



Representation of The Parties

Records

Reports

Consultation and Information

Joint Account Expenditures and Actions

Disposal and Abandonment



ARTICLE VII - RIGHTS OF THE PARTIES

20

7.1 Reservation of Rights

20

7.2 Inspection Rights

20

7.3 Access Rights

20

ARTICLE VIII - THE OPERATING COMMITTEE

21

8.1 Establishment and Powers

21

8.2 Representation

21

8.3 Chairman

22

8.4 Meetings

22

8.5 Minutes

22

8.6 Action Without a Meeting

23

8.7 Sub-Committees

23

8.8 Voting Procedure

23

8.9 Concession Provisions

24

8.10 Notification to the Committee

24

8.11 Costs

24

ARTICLE IX - PROJECT MANAGER

25

9.1

25

ARTICLE X - FUNDING OF THE JOINT OPERATIONS

25

10.1 Cash Call

25

10.2 Payments for Joint Operations Expenditures

26

10.3 Failure of a Party to Pay a Cash Call

26

ARTICLE XI - INSURANCE AND LITIGATION

27

11.2 Joint Account Insurance



27

11.3

29

11.4

29

11.5

31



Indemnity

Litigation

IMA #11 Insurance Proceeds



ARTICLE XII - EXPLORATION WORK PROGRAMME AND BUDGET

31

12.1 Annual Work Programme and Budget

31

12.2 Authorization for Expenditure

32

12.3 Amendment

32

ARTICLE XIII - APPRAISAL WORK PROGRAMME AND BUDGET

33

13.1 Joint Work Programme and Budget

33

13.2 Authorization for Expenditure

33

13.3 Review and Amendment

34

ARTICLE XIV - DEVELOPMENT WORK PROGRAMME AND BUDGET

34

14.1 Joint Work Programme and Budget

34

14.2 Authorization for Expenditure

35

14.3 Review and Amendment

36

ARTICLE XV - PRODUCTION WORK PROGRAMME AND BUDGET

37

15.1 Annual Work Programme and Budget

37

15.2 Authorization for Expenditure

37

15.3 Amendment

38

ARTICLE XVI - SOLE RISK OPERATIONS

38

16.1 Definitions

38

16.2 Sole Risk Operations

39

16.3 Conditions for Sole Risk Operations

40

16.4 Sole Risk Notice

40

16.5 Sole Risk Operation as Joint Operation

41

16.6 Sole Risk Operation

41

16.7 Operator of Sole Risk Operation

41

16.8 Commencement of Sole Risk Operation

41

16.9 Information Concerning Sole Risk Operation

42

16.10 Election to Participate in Further work



42

16.11

42

16.12

42

16.13

42



Use of Joint Property and Personnel of the Operator for Sole Risk Operation

Indemnification of the Non-Consenting Party

Title to The Sole Risk Operation, Production and Facilities



ARTICLE XVII - ACCOUNTING PROCEDURE

43

17.1

43

ARTICLE XVIII - DEFAULT

43

18.1 Failure to Pay

43

18.2 Remedy of Default

44

18.3 Continuation of Default

44

18.4

45

18.5

45

18.6 Other Remedies

45

ARTICLE XIX - DISPOSITION OF PRODUCTION

45

19.1 Right and Obligation to Take in Kind

45

19.2 Offtake Agreement for Crude Oil

46

19.3 Separate Agreement for Natural Gas

47

ARTICLE XX - CONFIDENTIALITY

47

20.1 Confidentiality Data and Information

47

20.2 Trading Rights

48

ARTICLE XXI - PUBLIC ANNOUNCEMENTS

49

21.1

49

21.2

49

21.3

49

ARTICLE XXII - OUTGOINGS AND GRANTS

49

22.1 Outgoings

49

22.2 Grants

50

ARTICLE XXIII - COVENANT, UNDERTAKING, RELATIONSHIP AND TAX

50

23.1 Covenant and Undertaking

50

23.2 Relationship



50

23.3

51



Tax



ARTICLE XXIV - ASSIGNMENT AND ENCUMBRANCES

51

24.1 Restriction

51

ARTICLE XXV - WITHDRAWAL

51

25.1 Restriction

51

25.2 Withdrawal

51

25.3 Conditions

52

ARTICLE XXVI - FORCE MAJEURE

53

26.1

53

26.2

54

ARTICLE XXVII - NOTICES

54

27.1

54

ARTICLE XXVIII - DISPUTE RESOLUTIONS PROVISIONS

54

28.1

54

28.2

54





JOINT OPERATING AGREEMENT

------------------------THIS



JOINT



OPERATING



AGREEMENT is made effective the 30th



day of June, 1998.



BETWEEN:

AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED,

Tiamiyu Savage Street, Victoria Island, P.O. Box 54452,

Lagos, Nigeria (hereinafter referred to as "AMNI."



of Plot 1377B

Falomo Ikoyi,



and

LIBERTY TECHNICAL SERVICES LTD., of 7th Floor, Folawiyo Plaza, 38 Warehouse

Road, Apapa, Lagos, Nigeria (hereinafter referred to as "Liberty")

WHEREAS

1.



Pursuant to the Joint Venture Agreement dated as of even date herewith (as

modified from time to time, a AJoint Venture Agreement@) AMNI and Liberty

entered into a joint venture for the exploration and development of the

Deep Zones associated with the IMA Field;



2.



AMNI and Liberty each hold certain working and revenue interest in the Deep



Zones pursuant to the provisions contained in the Joint Venture Agreement;

3.



The Joint Venture Agreement contemplates the execution of an agreement

providing for the joint exploration, development and production operation

of the Deep Zones as well as the management of the Deep Zones by the

Operator, all in accordance with the terms, provisions and conditions

hereinafter set forth;



NOW THEREFORE, in consideration of the promises and covenants hereinafter set

forth, the Parties hereby agree as follows:

ARTICLE I - DEFINITIONS

----------------------1.1



DEFINITIONS

Capitalized terms used herein but not defined

meanings specified by the Joint Venture Agreement.



1.1.1



herein



shall



have the



"ABANDONMENT AGREEMENT" means the proper plugging and abandoning

of a well in compliance with the Regulations and the restoration of

the well site to the satisfaction of any governmental body having

jurisdiction with respect thereto and to the reasonable satisfaction

of the owner and occupier of the surface.





1.1.2



"ACCOUNTING

hereto.



PROCEDURE"



means the



procedure



set out in Schedule "A"



1.1.3



"ACT"means the Petroleum Act of 1969 (Nigeria) and its subsidiary

legislation, all amendments thereto and all Regulations, policies and

statements passed in relation thereto.



1.1.4



"AFFILIATE" OR "AFFILIATED COMPANY" means a company, partnership or

other legal entity which controls, or is controlled by, an entity

which controls a Party, and for the purposes hereof, "control" means

the ownership directly or indirectly of more than fifty (50%) percent

of the shares or voting rights or privileges in a company, partnership

or legal entity.



1.1.5



"AGREEMENT" OR "JOINT OPERATING

AGREEMENT," "HEREOF," "HEREIN,"

"HERETO" and similar expressions means this Joint Operating Agreement,

together with schedules

attached

hereto and any amendment or

amendments made between the Parties in writing from time to time.



1.1.6



"AGREED INTEREST RATE" means interest compounded on a monthly basis,

at the rate per annum equal to the one (1) month term LIBOR rate for

U.S. Dollar deposits, as published by The Wall Street Journal or, if

not published, then by the Financial Times of London plus two percent

(2%) application on the first Business Day prior to the due date of

payment and thereafter on the first Business Day of each succeeding

one (1) month term. 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.



1.1.7



"AMNI" means Amni International Petroleum Development Company Limited.



1.1.8



"APPRAISAL WELL" means any well whose purpose at the time of

commencement of drilling such well is the determination of the extent

or the volume of Petroleum

reserves contained in an existing

Discovery.



1.1.9



"ASSETS" means the fixed and moveable assets of the Joint Operations

including without limitation any OPL or OML establishing the Deep



Zones of the IMA Field, exploration,

development,

production,

transportation, storage, delivery and export facilities and associated

assets including but not limited to offices, housing and welfare

facilities.

1.1.10



"AUTHORITY FOR EXPENDITURE" OR "AFE" means a written statement of an

operation proposed to be conducted pursuant to this Agreement, which

statement shall include:





(a)



the type, purpose and location of such operation, in sufficient

detail to enable a Party to understand the nature, scope and

sequence of such operation, the proposed time frame over which

such operation will be conducted and, if such operation is the

drilling or deepening of a well, the projected total depth

thereof, the proposed surface coordinates of the well and, if

they will differ materially from the surface coordinates of the

well, the proposed bottomhole coordinates therefor; and



(b)



the proposing Party's estimate of the anticipated costs of such

operation, which estimate shall be in sufficient detail to enable

a Party to identify, in summary form, the anticipated costs of

the various identifiable segments of such operation, including,

if applicable, those costs which relate to drilling, completing

and equipping a well.



1.1.11



"AVAILABLE PRODUCTION" means the quantity of Petroleum which can be

efficiently and economically produced and saved from the producing

wells subject to any production allowable within limitations imposed

by the Ministry or other technical

limitations resulting from

operations.



1.1.12



"BARREL" means a quantity consisting of forty-two (42) United States

gallons, corrected to a temperature of sixty (60) degrees Fahrenheit

under one (1) atmosphere of pressure.



1.1.13



"BUSINESS DAY" means a day on which the banks in London,

Zurich, Switzerland are customarily open for business.



1.1.14



"CALENDAR QUARTER" means a period of three (3) consecutive months

commencing on January 1 and ending the following March 31, a period of

three (3) months commencing on April 1 and ending on the following

June 30, a period of three (3) months commencing on July 1 and ending

on the following September 30 or a period of three (3) months

commencing on October 1 and ending on the following December 31

according to the Gregorian Calendar.



1.1.15



"CALENDAR YEAR" means a period of twelve (12) months commencing on

January 1 and ending on the following December 31 according to the

Gregorian Calendar.



1.1.16



"CASH CALL" means the amount in Dollars (or such other currency as the

Operating Committee shall reasonably designate) which the Operating

Committee requires a Cash Call Party to pay into the Joint Account

during a Cash Call Month to meet such Party's Participating Interest

of Petroleum Costs required to be paid during the Cash Call Month,

after adjusting for balances or deficits in such bank account or the

Operator's accounting records (as the case may be) as well as any

credit receipts anticipated during such month, all in accordance with

Article VIII of this Agreement.



1.1.17



"CASH CALL MONTH" means the calendar month in which specific costs and

expenditures are to be incurred for the Joint Account.







England and



1.1.18



"CASH CALL PARTY" means a party that has an obligation, be it direct

or indirect, to pay for costs associated with the exploration,

development and production of Petroleum from the Deep Zones of the IMA

Field.



1.1.19



"CASH PREMIUM" means the payment made pursuant to Article XVI by a

Non-Consenting Party to reinstate its right to participate in a Sole

Risk Operation.



1.1.20



"COMMERCIAL PRODUCTION QUOTA" means the quantity of Petroleum fixed or

established by the National Petroleum Investments Management Services

("NAPIMS") (or any other regulatory agency from time to time on behalf

of the Ministry as the permissible quantity that may be produced from

the Deep Zones of the IMA Field (or a portion hereof), on a crude

stream basis for a particular month or Calendar Quarter.



1.1.21



"COMPLETION" means an operation intended to complete a well through

the Christmas tree as a producer of Petroleum in one or more Zones

including, but not limited to, the setting of production casing,

perforating, stimulating the well and production Testing conducted in

such operation. "COMPLETE" and other derivatives shall be construed

accordingly.



1.1.22



"CONCESSION" means a certain geographic area described and governed by

an OPL or OML and allocated to an owner for the purpose of exploration

and exploitation.



1.1.23



"CONCESSION BLOCK 237" means the surface area delineated in OPL 237

details of which are more particularly described in the survey plan

annexed to OPL 237, as such area may vary from time to time during the

term of OPL 237 and any extensions thereto, or Oil Mining Lease

arising therefrom.



1.1.24



"CRUDE OIL" means the liquid petroleum which has been treated but not

refined and includes condensates but excludes water and sediments.



1.1.25



"DATA"



1.1.26



"DAY(S)" means

provided.



1.1.27



"DEFAULTING



1.1.28



"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,

whichever is the deeper. Deepen and other derivatives shall be

construed accordingly.





1.1.29



has



the



meaning

a



PARTY"



set



calendar



out

day



in



Article



20.2.1



unless otherwise specifically



shall have the meaning ascribed in Article XVIII.



ADEEP ZONES@ means all geological formations within and around the IMA

Field that are north (upthrown) and south (downthrown) of the

geological fault dividing the IMA field, all depths below the

geological producing reservoir within the IMA Field, known as the AF@

sand, as currently shown on the maps and schematic cross-section

materials covering the IMA Field, which are attached as Schedule AD@

to the Joint Venture Agreement between Amni International Petroleum

Company Limited and Liberty Technical Services Ltd, of even date

herewith or a depth of 12,150 feet (true vertical depth), whichever is

the lesser depth, lying within the geographical co-ordinates along the

northern boundary of OML 112 and OPL 237, to the southern boundary of

OML 112, to the western boundary of OML 112 and to the eastern

boundary of 550,000 meters East, as reflected on the maps of the IMA

Field attached to the Joint Venture Agreement.



1.1.30



"DEVELOPMENT PLAN" means a plan for the development of Petroleum from

an Exploitation Area covering all or a portion of the Deep Zones of

the IMA Field.



1.1.31



"DEVELOPMENT WELL" means any well drilled

Petroleum pursuant to a Development Plan.



1.1.32



"DISCOVERY" means the discovery of an accumulation of Petroleum whose

existence until that moment was unknown.



1.1.33



"DOLLARS" OR "US$" means dollars of the United States of America.



1.1.34



"EFFECTIVE DATE" means the date this

stated in Article II.



1.1.35



"ENTITLEMENT" means a quantity of Petroleum of which a Party has

right and obligation to take delivery pursuant to the terms of

Joint Venture Agreement or, if applicable, an offtake agreement,

shall be derived from the Party's Participating Interest in

Petroleum produced after adjustment for overlifts and underlifts.



1.1.36



"EXPLOITATION AREA" means that part of the Deep Zones of the IMA Field

which is delineated in a Development Plan approved as a Joint

Operation or as Sole Risk Operation.



1.1.37



"EXPLOITATION PERIOD" means any and all periods of exploitation during

which the production and removal of Petroleum from the Deep Zones of

the IMA Field is permitted under OML 112 or Concession Block 237.



1.1.38



"EXPLORATION WELL" means any well drilled during the course

exploration work other than an Appraisal Well or Development Well.



1.1.39



"G & G DATA" means any geological, geophysical and geochemical

and other information that is not obtained through a wellbore.



1.1.40



"GOVERNMENT" means the Federal government of Nigeria as represented by

the Ministry of Petroleum Resources.





1.1.41



for the



Agreement



production



of



comes into effect as

the

the

and

the



of

data



AIMA FIELD@ means the area reflected on Schedule D, which area is

contained within Concession Block 469 as delineated in Nigeria Oil

Prospecting License 469, dated August 24, 1993, subsequently converted

to Oil Mining License 112 on February 18, 1998 and, if applicable,

Concession Block 237



1.1.42



"JOINT ACCOUNT" means those accounts maintained by the Operator and

the Liberty in accordance with the provisions of the Joint Venture

Agreement and this Agreement and of the Accounting Procedure for Joint

Operations.



1.1.43



"JOINT OPERATIONS" means those operations and activities carried out

by the Operator pursuant to this Agreement, the costs of which are

chargeable to all Parties.



1.1.44



"JOINT PROPERTY" means, at any point in time, all wells, facilities,

equipment, materials, information, funds and the property held for the

Joint Account and that has been acquired and/or will be paid for by

the Parties based on their Participating Interests.



1.1.45



"JOINT

VENTURE

AGREEMENT"

has the

introduction on the first page hereof.



1.1.46



"LIBERTY"



1.1.47



"MINISTRY"



means

means



Liberty

the



Technical

Ministry



of



meaning



Services



specified



in



the



Resources



of



the



Ltd.



Petroleum



Government.

1.1.48



"NON-CONSENTING PARTY" means a Party who elects not to participate in

a Sole Risk Operation.



1.1.49



"NON-OPERATOR"

the Operator.



1.1.50



"OIL MINING LEASE" or "OML" means a lease called an oil mining lease

issued by the Ministry following the fulfilment of the minimum work

obligations or the discovery of Commercial Quantities of Petroleum.



1.1.51



"OIL MINING LEASE 112" or "OML 112" means the oil mining lease that

was issued by the Ministry to the holder of OPL 469 on February 18,

1998 and includes (a) all rights,

title and interest granted

thereunder, including any extension, renewal or amendment thereof made

in writing, and (b) all schedules and plans attached thereto or

referred to therein pursuant to which the Amni has acquired an

interest in all Petroleum found and produced within the geographic

area defined and described therein including the right to prospect

for, take and remove and sell any petroleum.





1.1.52



means the Party or Parties to the Agreement other than



"OIL PROSPECTING LICENSE" OR "OPL" means a license called an oil

prospecting license issued by the Ministry and which grants to the

holder exclusive rights to explore and prospect for Petroleum within

the area of the license.



1.1.53



"OIL PROSPECTING LICENSE NO. 237" OR "OPL 237" means Oil Prospecting

License No. 237 issued by the Minister of Petroleum Resource of the

Government to the Owner on December 22, 1994, and includes: (a) all

rights, title and interest granted thereunder including any extension,

renewal or amendment thereof made in writing and (b) all schedules and

plans attached thereto or referred to therein pursuant to which the

Owner has acquired an interest in all Petroleum found and produced

within Concession Block 237, including the right to prospect for, take

and remove and sell any Petroleum.



1.1.54



"OPERATOR" means a Party to this

accordance with this Agreement.



1.1.55



"OPERATING COMMITTEE"

with Article VIII.



I.1.56



"OWNER"



1.1.57



"PARTICIPATING INTEREST" means the Participating

Parties as defined in the Joint Venture Agreement.



1.1.58



"PARTIES" means collectively AMNI and Liberty and any respective

successor-in-title or assigns in accordance with the provisions of

this Agreement.



1.1.59



"PARTY" means AMNI or Liberty and any respective successors-in-title

or assigns in accordance with the provisions of this Agreement.



1.1.60



"PETROLEUM" means all mineral oil (or any related hydrocarbons)

natural gas, as it exists in its natural state in strata (including

condensate,

sulphur and any and all other liquid and gaseous

hydrocarbons) and does not include coal or bituminous states or other

stratified deposits from which oil can be extracted by destructive

distillation.



1.1.61



"PETROLEUM COSTS" means those reasonable costs, claims and expenses

incurred by the Operator, from time to time on or after the Effective



means



Agreement



means the committee



designated



as such in



constituted in accordance



AMNI.

Interests



of the



Date, both within and outside of Nigeria, directly related to

exploration, development and production of Petroleum from the Deep

Zones of the IMA Field that have been properly incurred pursuant to

the terms of this Joint Operating Agreement.

1.1.62





1.1.63



"PETROLEUM OPERATIONS" means the entire process of exploring, drilling

and producing the Petroleum contained in the Deep Zones of the IMA

Field in accordance with the Regulations and the laws of the Federal

Republic of Nigeria.

"PLUGGING BACK" means a single operation whereby a deeper Zone is

abandoned in order to attempt a Completion in a shallower Zone. "PLUG

BACK" and other derivatives shall be construed accordingly.



1.1.64



"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. "RECOMPLETE" and other derivatives shall

be construed accordingly.



1.1.65



"REGULATIONS"

means all rules,

orders,

policy statements and

regulations affecting Oil Prospecting Licenses and Oil Mining Leases

in effect from time to time and made by the Government in respect of

concession blocks and operations conducted thereon.



1.1.66



"REWORKING" means an operation conducted in the wellbore of a well

after Completion to secure, restore, or improve production in a Zone

which is currently open to production in the wellbore. Such operations

include but are not limited to well stimulation operations, but

exclude any routine repair or

maintenance

work, or drilling,

Sidetracking, Deepening, Completing, Recompleting, or Plugging Back of

a well. "REWORK" and other derivatives shall be construed accordingly.



1.1.67



"SENIOR SUPERVISORY PERSONNEL" means any supervisory employee of the

Operator who functions as the Operator=s designated manager or

supervisor who is responsible for, or in charge of onsite drilling,

construction or production and related operations or any other field

operation.



1.1.68



"SIDETRACKING" means the directional control and intentional deviation

of a well from vertical so as to change the bottom hole location

unless done to straighten the hole or to drill around junk in the hole

or to overcome other mechanical difficulties. "SIDETRACK" and other

derivatives shall be construed accordingly.



1.1.69



"SOLE RISK OPERATOR" means a Party who agrees to participate in and

pay its share of the cost of a Sole Risk Operation.



1.1.70



"SOLE RISK OPERATION" means those operations and activities carried

out by the Sole Risk Operator, pursuant to this Agreement, the costs

of which are chargeable to the account of less than all the Parties.



1.1.71



"SOLE RISK EXPLORATORY

Risk Operation.



1.1.72



"TAX OIL" means thirty percent (30%) of the total production of

Petroleum from the Deep Zones of the IMA Field which shall be held

pursuant to an arrangement acceptable to the parties hereto pursuant

to which the Government will be paid all royalties, petroleum profits

taxes and other taxes and governmental levies due and owing with

respect to Joint Operations





1.1.73



WELL" means a well drilled pursuant to a Sole



"TESTING" means an operation intended to evaluate the capacity of a

Zone to produce Petroleum. "TEST" and other derivatives shall be



construed accordingly.

1.1.74



"WORK

PROGRAMME AND BUDGET" means a work programme for Joint

Operations and budget thereof as described and approved in accordance

with Articles 12, 13, 14 and 15.



1.1.75



"ZONE" means a stratum of earth containing or thought to contain a

common accumulation of Petroleum separately producible from any other

common accumulation of Petroleum.



1.2



SCHEDULES



1.2.1



The following

Agreement:

(a)

(b)

(c)

(d)

(e)



1.3

1.3.1



Schedules are attached hereto and



incorporated in this



Schedule "A" which is the Uniform Accounting Procedure

Schedule "B" which is the Uniform Project Implementation

Procedure;

Schedule "C" which is the Uniform Nomination Scheduling

and Lifting Procedure;

Schedule "D" which is a map showing the location of the IMA

Field; and

Schedule "E" which is a copy of the AFE that has been

submitted to the insurance carriers regarding the drilling

of IMA #11.



INTERPRETATION

Save to the extent that the context or the express

Agreement otherwise requires:

the singular



provisions of this



(a)



Words importing

versa;



shall include the plural and vice



(b)



Headings are for convenience of reference

affect the construction of this Agreement;



(c)



All references to articles and schedules shall be construed as

references to articles of and schedules to this Agreement.



(d)



All references to documents or other instruments include all

amendments and replacements thereof and supplements thereto;



(e)



All

references to

successors-in-title,

representatives;



(f)



All references to any statute or statutory provision shall

include references to any statute or statutory provisions which

amends, extends, consolidates or replaces the same for which has

been amended, extended, consolidated or replaced by the same and

shall include any orders, Regulations, instrument or other

subordinate legislation made under the relevant statue.



only and shall not



persons or

corporations

transferees,

assigns



include

and



their

legal







ARTICLE II - DURATION

--------------------2.1



EFFECTIVE



DATE



AND



TERM



This Agreement shall be deemed to have commenced on the Effective Date

of the Joint Venture Agreement and shall, subject to Article XXV,

continue for so long as the Joint Venture Agreement remains in force

or, otherwise until all materials, equipment and personal property

used in connection with the Joint Operations have been removed and



disposed of, and final settlement has been made among the Parties in

accordance with their respective rights and obligations hereunder.

For the avoidance of doubt, portions of this Agreement as described in

(a), (b), and (c) below shall remain in effect until:



2.2



(a)



all wells have been properly abandoned in accordance with Article

6.10;



(b)



all obligations, claims, arbitrations

settled or otherwise disposed of; and



(c)



the time relating to the protection of confidential information

and proprietary technology has expired in accordance with Article

XX.



CONTINUING



and lawsuits



have been



OBLIGATION



The provisions of this Agreement which for any reason require action

or forbearance after the expiration of the term of this Agreement or

the termination of this Agreement for whatever cause either generally

or in respect of the party by virtue of that Party withdrawing from

this Agreement or selling, transferring or assigning the whole of its

Participating Interest shall remain operative and in full force and

effect regardless of the expiry or termination of this Agreement.

ARTICLE III - SCOPE AND UNDERSTANDING

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



SCOPE



3.1.1



The scope of this Agreement shall extend to the exploration for and

the production and marketing of Petroleum in respect of the Deep Zones

of the IMA Field.





3.1.2



3.2



Notwithstanding the foregoing, this Agreement shall not extend to any

joint financing arrangements or any joint marketing or joint sales of

Petroleum.

UNDERSTANDING

This Agreement and the Joint Venture Agreement represent the entire

understanding of the Parties in relation to the Deep Zones of the IMA

Field.

ARTICLE IV - PARTICIPATING INTEREST

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



4.1



PARTICIPATING



INTEREST



The Participating Interests of the Parties in the Production

Petroleum Costs are as set forth in the Joint Venture Agreement.

4.2



OWNERSHIP, OBLIGATIONS

AGREEMENT



AND



LIABILITIES



GOVERNED



BY



JOINT



and



VENTURE



(a)



Unless otherwise provided in this Agreement, all the rights and

interests in and under the Joint Venture Agreement, all Joint

Property and any Petroleum produced from the Deep Zones of the

IMA Field shall be owned by the Parties in accordance with the

provisions of the Joint Venture Agreement.



(b)



Unless otherwise provided in this Agreement, the obligations of

the Parties under the Joint Venture Agreement and all liabilities



and expenses incurred in accordance with the terms of this

Agreement by the Operator in connection with Joint Operations

shall be charged to the Joint Account and all credits to the

Joint Account

shall be shared by the Parties,

as among

themselves, in accordance with their respective Participating

Interests.

(c)



Unless otherwise provided in this Agreement, all liabilities and

costs incurred by any Party in accordance with the terms of this

Agreement in connection with Joint Operations shall be borne by

the Parties in accordance with the provisions of the Joint

Venture Agreement.

ARTICLE V - THE OPERATOR

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



5.1



DESIGNATION



OF



THE



OPERATOR



AMNI is hereby designated as the Operator, and agrees to act in

accordance with the terms and conditions of the Joint Venture

Agreement, all applicable Regulations and this Agreement, which terms

and conditions shall also apply to any successor Operator.

5.2



RESIGNATION



OR



REMOVAL



OF



THE



OPERATOR





Subject to Article 5.3, the Operator may resign as Operator at any

time by so notifying the other Parties at least one hundred twenty

(120) Days prior to the effective date of such resignation.

5.3



REMOVAL

(a)



OF



THE



OPERATOR



Subject to Article 5.3, the Operator shall be

receipt of notice from any Non-Operator if:

(i)



removed



an order is made by a court or an effective resolution is

passed for the dissolution, liquidation, winding up, or

reorganization of the Operator;



(ii) the Operator

dissolves,

corporate existence;



liquidates



or



terminates



(iii)the Operator becomes insolvent,

bankrupt

assignment for the benefit of creditors;

(iv) a receiver is appointed

Operator's assets;

(v)



upon



for a



substantial



or



makes



part



its

an



of the



the Operator commits a substantial breach of a material

provision of this Agreement and fails to cure the breach

within thirty (30) Days after notice of the breach; or



(vi) the Operator or has its rights suspended pursuant to Section

15.1 of the Joint Venture Agreement.

(b)



5.4



If the Operator together with any Affiliate of the Operator

ceases to be a holder of a Participating Interest, then the

Operator shall be required to promptly notify the other Parties.

The Operating Committee shall then vote within fourteen (14) Days

of such notification on whether or not a successor Operator

should be named pursuant to Article 5.4.



APPOINTMENT



OF



SUCCESSOR



When a change of Operator occurs pursuant to Article 5.2 or Article



5.3:

(a)



The Operating Committee shall meet as soon as possible to appoint

a successor Operator pursuant to the voting procedure of Article

VIII. However, no Party may be appointed successor Operator

against its will.



(b)



If an Operator is removed, neither the Operator nor any Affiliate

of the Operator shall have the right to vote for itself on the

appointment of a successor Operator, nor be considered as a

candidate for the successor Operator.



(c)



A resigning or removed Operator shall be compensated out of the

Joint Account for its reasonable expenses directly related to its

resignation or removal.



(d)



The Operating Committee shall arrange for the taking of an

independent inventory of all Joint Property and Petroleum, and an

audit of the books and records of the removed Operator. Such

inventory and audit shall be completed, if possible, no later

than the effective

date of the change of Operator.

The

liabilities and expenses of such inventory and audit shall be

charged to the Joint Account.



(e)



The resignation or removal of the Operator and its replacement by

the successor Operator shall not become effective prior to

receipt of any necessary governmental approvals.



(f)



Upon the effective date of the resignation or removal, the

successor Operator shall succeed to all duties, rights and

authority prescribed for the Operator. The former Operator shall

transfer to the successor Operator custody of all Joint Property,

books of account, records and other documents maintained by the

Operator pertaining to the Deep Zones and to Joint 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.







5.5



COMMINGLING



OF



FUNDS



The Operator may not commingle

receives from or for the Joint

Agreement and this Agreement.



with its own funds the monies which it

Account pursuant to the Joint Venture



ARTICLE VI - AUTHORITY AND DUTIES OF THE OPERATOR

------------------------------------------------6.1



RIGHTS



6.1.1



Subject to the terms and conditions of the Joint Venture Agreement and

this Agreement, the Operator shall have all of the rights, functions

and duties of the Operator under the Joint Venture Agreement and shall

have exclusive charge of and shall conduct all the Joint Operations

under the overall supervision of the Operating Committee. The Operator

may employ technical advisors, independent contractors and/or agents

in such Joint Operations.



6.1.2



The Operator shall remain responsible for all Joint Operations as the

Operator as and to the extent provided under this Agreement, whether

conducted by itself, its technical advisers, its Affiliates, its

agents or its contractors.





6.1.3



Notwithstanding



anything in this



Agreement to the contrary,



(a) the



bottom hole location for the first well to be drilled under this

Agreement shall be determined by the Operator after consultation with

and consideration of the views of Liberty and (b) all wells drilled

under this Agreement shall be drilled pursuant to "turnkey" drilling

contracts upon such terms and with such contractors as are reasonably

acceptable to the Parties hereto.

6.2



RESPONSIBILITY



6.2.1



Subject to the overall supervision of the Operating Committee, the

responsibilities of the Operator shall include but not be limited to:

(a)



the preparation of Work Programme and Budget and AFE's pursuant

to the provisions of this Agreement,



(b)



the implementation of such Work Programme and Budget as shall

together with relevant AFE's have been approved by the Operating

Committee;



(c)



the provision to each of the Parties of reports, data and

information concerning the Joint Operations pursuant to the

provisions of this Agreement;



(d)



the planning

material;



(e)



the direction and control of statistical and accounting services;

and



(f)



the provision of all technical and advisory services required for

the efficient performance of the Joint Operations.



for and



obtaining



of all



requisite



services and



6.2.2



The Operator shall conduct the Joint Operations in a proper and

workmanlike

manner in

accordance

with methods and

practices

customarily used in good and prudent oil and gas fields practice and

with that degree of diligence and prudence reasonably and ordinarily

exercised by experienced operators engaged in a similar activity under

similar circumstances and conditions. The Operator shall further do or

cause to be done with due diligence, all such acts and things within

its control as may be necessary to keep and maintain the Deep Zones of

the IMA Field in force and effect and shall conduct the Joint

Operations in compliance with the requirements of the Act, any OPL or

OML controlling as to the Deep Zones of the IMA Field and any other

applicable laws and Regulations and in accordance with approved Work

Programme and Budget.



6.2.3



The Operator shall only be liable for any loss or damage which results

from:

(a)



its failure to obtain or maintain any insurance which it is

required to obtain and maintain under Article 11.2, unless the

Operator has used all reasonable endeavours to obtain or maintain

any such insurance but has been unable to do so and has promptly

so notified the parties participating or proposing to participate

therein; or



(b)



its willful misconduct;





provided that in neither case shall the Operator be liable for

any consequential loss, including but not limited to inability to

produce Petroleum, production or loss of profits. For the

avoidance of doubt, the Operator shall not be liable for any loss

or damage resulting from the negligence of the Operator, its

servants, agents, contractors or employees. Nothing in this



Article shall, however, be deemed to release the Party designated

as Operator from any costs, expense or liability attributable to

its Participating Interest share of Joint Operations.

6.3



LIENS



AND



ENCUMBRANCES



The Operator shall, insofar as it may be within its control, keep all

Joint Property, the Deep Zones of the IMA Field and any OPL or OML

controlling as to the Deep Zones of the IMA Field free from all liens,

charges and encumbrances arising out of the Joint Operations.

6.4



EMPLOYEES



AND



CONTRACTORS



6.4.1



Subject to the provisions of the Joint Venture Agreement and this

Agreement, the Operator shall determine (based on the approved Work

Programme and Budget) the number of employees, the selection of such

employees, the hours of work and remuneration and such employees shall

be the employees of the Operator and not of the Parties. The Operator

shall employ only such employees, agents and contractors as are

reasonably necessary to conduct the Joint Operations.



6.4.2



In the case of any proposed contract for the Joint Operations where

the cost thereof will or is likely to exceed two hundred and fifty

thousand dollars ($250,000) or such lesser amounts as shall from time

to time be determined by the Operating Committee having regard (inter

alia) to the nature of the Joint Operations, the Operator shall,

unless

otherwise

agreed by the

Operating

Committee

in the

circumstances referred to in Article 6.9.2:

(a)



obtain competitive sealed bid tenders and consult fully with the

Operating Committee over the preparation of a list of the persons

to be invited to tender (including any sub-contractors or

suppliers) and the preparation of the tender documents, such

consultation to take place on a timely enough basis to allow the

members of the Operating Committee to make recommendations;



(b)



after the expiration of the period allowed for tender, and the

bids have been opened, report details of all bids received and

any rebids, amendments to bids and subsequent negotiations to the

Operating Committee and make a recommendation to them;



(c)



obtain the approval of the Operating Committee to the material

terms of the recommended bid prior to entering into any contract

in respect thereof;



(d)



use all reasonable endeavours to ensure that any such contract

can be freely assigned to any of the Non-Operators in the event

of the resignation or removal of the Operator under Article 5.2

and include provisions whereby (a) only the Operator shall incur

any liability to the contractor or supplier under the contract

and (b) the Operator shall be entitled to enforce the contract on

behalf of all the Parties and to recover on behalf of all the

Parties any loss or damage caused by them by breach of such

contract by the

contractor

or supplier

subject to such

limitations and exceptions as may be provided in the contract;



(e)



promptly notify the Operating Committee of each such contract and

of any subsequent revisions thereto and furnish copies of all

such contracts and revisions to the Operating Committee.







6.5



REPRESENTATION



OF



THE



PARTIES



Subject to the provisions of the Joint Venture Agreement, the Operator

shall represent the Parties in all matters or dealings with the



Ministry, any other governmental authorities or third parties insofar

as the same relate to the Joint Operations, provided that there is

reserved to each Party the unfettered right to deal with the Ministry

or any other governmental authorities or third parties in respect of

matters relating solely to its own Participating Interest. The

Operator shall in any event give prior notice to the Parties of any

representations which it proposes to make as Operator to the Ministry,

any other governmental authority or third party, which may reasonably

be expected to have a material effect upon the interests of the

Parties, and shall also give notice to the Parties of the results of

any such representation. Non-Operators shall have the right to attend

or be represented at such meetings, and the Operator shall, as early

as practicable, before such meeting, notify the other Parties, of such

meeting. Any Non-Operator proposing to meet with the Ministry or other

governmental authorities shall, as early as practicable, before such

meeting, notify the other Parties and, so far as it may be within such

Party's power, arrange for the other Parties to attend or be

represented at such meeting.

6.6



RECORDS

The Operator shall prepare and maintain proper books, records and

inventories of the Joint Operations which shall be kept in compliance

with the Accounting Procedure and with due regard to the requirements

of the Act, the Joint Venture Agreement and any OPL or OML controlling

as to the Deep Zones of the IMA Field.



6.7



REPORTS

The



Operator



shall:



(a)



promptly provide each Party with daily drilling reports (by

telex) and monthly production reports of Joint Operations and

such other reports as the Operating Committee shall decide and,

at the sole cost of the Party requesting same, such additional

reports as such Party shall reasonably request; and



(b)



promptly make all reports concerning the Joint Operations to the

appropriate governmental authorities as required under the Act

and the Governmental documents governing the Deep Zones of the

IMA Field after review by the Parties concurrently therewith,

furnish copies of all such reports to all the Parties together,

when furnishing to the Parties a copy of the quarterly report to

the Government with a brief commentary on exploration activity.







6.8



CONSULTATION



AND



INFORMATION



6.8.1



The Operator shall freely consult with the Parties and keep them

informed in a timely manner of matters

concerning

the Joint

Operations. In particular the Operator shall ensure that the Parties

are advised of circumstances which, in the reasonable opinion of the

Operator, may warrant the taking out of insurance either for the Joint

Account or by the Parties individually.



6.8.2



Without

shall:



prejudice to the



generality of Article



6.8.1,



the Operator



(a)



inform each Party of all logging, coring, testing and other

material Joint

Operations with such advance notice as is

practicable in the circumstances, so that each Party may, subject

to Article 7.3 have one or more representatives present on

location during the conduct of Joint Operations; and



(b)



provide each Party with copies of all well logs and core analyses



and such engineering, geological, geophysical, technical and

other material data and information relating to the Joint

Operations. Further, Operator shall provide a Party with such

additional data and information as such Party shall reasonably

request, at the sole cost of the Party requesting such data and

information.

6.9



JOINT



6.9.1



The Operator is authorized to make such expenditures, incur such

commitments for expenditures and take such actions as are required to

properly maintain and operate the Joint Operations and Joint Property

and as shall have been authorized by the Operating Committee in

accordance with Articles XII, XIII, XIV and XV (but subject to Article

6.4.2) or as are authorized under Article 6.9.2.





6.9.2



ACCOUNT



EXPENDITURES



AND



ACTIONS



The Operator is authorized to make any

expenditure

or incur

commitments for expenditures or take any actions it deems necessary in

case of an emergency for the safeguarding of lives or property or the

prevention of mitigation of pollution. The Operator shall promptly

notify the Operating Committee of any such circumstances and the

amount of expenditures and commitments for expenditures so made and

incurred and actions so taken.



6.9.3



If necessary to carry out an approved Work Programme and Budget, the

Operator is authorized to make expenditures on a line item of an

approved Work Programme and Budget item in excess of the Work

Programme and Budget approved therefore up to but no exceeding ten

percent (10%) of the value stated in the Work Programme and Budget for

such item provided

however that no cumulative

total of such

expenditures shall exceed five percent (5%) of the total annual Work

Programme and Budget. Such excess expenditure shall be reported

promptly to the Operating Committee by the Operator.



6.9.4



The Operator is authorized to make expenditures for Joint Operations

in the Deep Zone of the IMA Field during any year not included in an

approved Work Programme and Budget or not provided for in an approved

Work Programme and Budget, limited, however, to a total, not exceeding

$100,000 provided that (a) such expenditures shall not be for purposes

theretofore

rejected by the Operating

Committee and (b) such

expenditures shall be reasonably necessary for the maintenance of the

Deep Zones of the IMA Field or any Joint Property, and provided

further that the said expenditures will be reported promptly to the

Operating Committee and thereafter the amount for which no prior

Operating Committee authorization is required shall be increased back

to the said maximum of $100,000.



6.10



DISPOSAL



6.10.1



If the Operator shall consider that any item of Joint Property is no

longer needed or suitable for the Joint Operations the Operator shall,

subject to the provisions of the Accounting Procedure, dispose of the

same. The Operator shall notify the Operating Committee of such

disposal as soon as practicable thereafter.



6.10.2



If the Parties shall decide to abandon the Joint Operations or any

part thereof, the Operator shall recover and endeavor to dispose of as

much of the Joint Property as can economically and reasonably be

recovered or as may be required to be recovered under the Act, any OPL

or OML controlling as to the Deep Zones of the IMA Field or any other

applicable law, and the net costs or net proceeds therefrom shall be

charged or credited to the Joint Account for eventual allocation in

proportion to the Participating Interests of the Parties.



AND



ABANDONMENT





6.10.3



Without prejudice to Article 6.10.2, following any proposal made to

the Operating Committee for the Operator to prepare a development Work

Programme and Budget for a particular Discovery, the Parties shall,

before submission to the Ministry of a programme in good faith

negotiate, agree and execute an Abandonment Agreement relating to the

abandonment (which expression shall include demolition and removal

together with any necessary site reinstatement) of any offshore

installation

and pipelines used in connection

with the Joint

Operations. The terms of the Abandonment Agreement shall be prepared

in all respects with due regard to and in accordance with the

requirements of the Act and shall provide inter alia for:

(a)



an equitable sharing between the Parties of their liability to

meet the costs of and other obligations

relating to the

abandonment of such offshore installations and pipelines;



(b)



the

preparation

and periodic review by the Operator for

submission to the Parties of estimates of the likely costs to the

Parties of such abandonment and of the amount and value of the

net recoverable reserves of the field in question, provided that

any Party shall have the right reasonably to require the

preparation of further reports and studies in relation thereto;



(c)



the obligation of each party, when the estimated value of the net

recoverable reserves of the field in question equals one hundred

thirty-five percent (135%) of the said estimated abandonment

costs, to provide to the other Parties adequate security for its

liability to meet such abandonment costs;



(d)



the determination and periodic review by the Parties (other than

the Party proposing the creation, or maintenance, amendment for

replacement of existing, security for its said liability to meet

such abandonment costs) of the adequacy of such proposal, such

determination to be made by the Operating Committee;



(e)



without prejudice to the provisions of paragraphs (c) and (d)

above, the security to be provided by each Party may include but

shall not be limited to: (1) an irrevocable guarantee from such

Party's parent company; (2) an irrevocable guarantee or letter of

credit from a bank or other financial institution having a credit

rating satisfactory to the other Party acting reasonably; (3)

security in favor of the Parties over assets of such party or a

third party; or (4) the establishment of a trust fund to receive

proceeds from such Party's entitlement to production from the IMA

Field;



(f)



in the event of the failure of any Party to satisfy the relevant

proportion of the other Parties as to the adequacy of the

security which it proposes pursuant to paragraph (d) above, such

Party shall be obliged to pay proceeds from such Party's

entitlement to production from the IMA Field to the Operator or

an independent third party as trustee for the Parties, which

proceeds shall be deposited and retained in an interest-bearing

account; property in the payment into such account shall pass to

the trustee at the time of their payment into the account;

failure to make such payments shall constitute a default for the

purposes of Article 17; upon the liability of the Parties to meet

their respective abandonment obligations failing to be discharged

such proceeds shall be applied in the discharge of the said

respective liability of the Party obliged to make such payments

and any balance shall be returned to such Party;







(g)



any Party intending to assign the whole or any part of its

interest in the Deep Zones in the IMA Field and in and under this

Agreement shall require the assignee of the interest to be

assigned and novated into the Abandonment Agreement and assumes

any liability thereunder corresponding to the said interest to be

assigned to it, and no person shall acquire such interest until

such obligation on the part of such Party has been discharged.

ARTICLE VII - RIGHTS OF THE PARTIES

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



7.1



RESERVATION



OF



RIGHTS



Unless otherwise provided in this Agreement or the Joint Venture

Agreement, each Party reserves all its rights under the Deep Zones of

the IMA Field.

7.2



INSPECTION



RIGHTS



Each Party shall have the right to inspect, at all reasonable times

during usual business hours, all books, records and inventories of any

kind or nature maintained by or on behalf of the Operator and relating

to the Joint Operations

other than those books,

records and

inventories maintained by the Operator as the owner of a Participating

Interest, provided that such Party gives the Operator not less than

fourteen (14) Days' prior notice of the date upon which it desires to

make such inspection and identifies the person or persons to conduct

such inspection.

7.3



ACCESS



RIGHTS



Each Party shall have the right, at all reasonable times and at its

sole risk and expense, of access to the areas contained within the IMA

Field and/or the Joint Operations, provided such Party gives the

Operator reasonable notice of the date such access is required and

identifies the representative or representatives to whom such access

is to be granted. If any party wishes access to be given to more than

one representative at a time the Operator shall not be required to

grant such for the additional representatives if, and to the extent

that, the granting of such access will interfere with the conduct of

Joint Operations.

ARTICLE VIII - THE OPERATING COMMITTEE

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



ESTABLISHMENT



AND



POWERS





To provide for the overall supervision and direction of the Joint

Operations, there is hereby established an Operating Committee which

shall exercise overall

supervision and control of all matters

pertaining to the Joint Operations. Without limiting the generality of

the foregoing, but subject as otherwise provided in the Joint Venture

Agreement and elsewhere in this Agreement, the powers and duties of

the Operating Committee shall include:

(a)



the consideration and determination of all matters relating to

general policies, procedures and methods of operation hereunder;



(b)



the approval of any public announcement or statement

this Agreement or the Joint Operations;



(c)



the consideration,



regarding



revision and approval or disapproval,



of all



proposed Work Programme and Budget and AFE's, all of which are to

be prepared in accordance with the provisions of this Agreement;



8.2



(d)



the determination of the timing and location of all wells drilled

under the Joint Operations and any change in the use or status of

a well;



(e)



the determination of whether the Operator will represent the

parties regarding any matters or dealings with the Ministry, any

other governmental authorities or third parties insofar as the

same relate to the Joint Operations, provided that there is

reserved to each Party the unfettered right to deal with the

Ministry, any other governmental authorities or any third party

in respect of matters relating solely to its own Participating

Interest;



(f)



the consideration and, if so required, the determination of any

other matter relating to the Joint Operations which may be

referred to it by the Parties or any of them (other than any

proposal to amend this

Agreement)

or which is otherwise

designated under the Joint Venture Agreement and this Agreement

for reference to it; and



(g)



authorize and supervise Joint Operations that are necessary or

desirable to fulfill the Joint Venture Agreement and properly

explore and exploit the Deep Zones of the IMA Field in accordance

with this Agreement and in the manner appropriate in the

circumstances.



REPRESENTATION

The Operating Committee shall consist of seven members

the Parties from time to time on the following terms.

AMNI

Liberty



6

1



appointed by



representatives

representative





Each Party shall as soon as possible

give notice in writing to the other

name and address of its initial

Operating Committee. Any Party may

giving not less than seven (7) Days'

the other Party.

8.3



after the date of this Agreement,

Parties and the Operator of the

representatives to serve on the

change its representatives by

written notice of such changes to



CHAIRMAN

One of the representatives of the Party which is the Operator shall be

the Chairman of the Operating Committee.



8.4



MEETINGS



8.4.1



The Operating Committee shall hold meetings every sixty (60) Days (or

at such other regular intervals as shall be agreed by the Operating

Committee) in Lagos, Nigeria, or at such other place as shall be

agreed by the Operating Committee. The Operator shall call such

meetings and shall give at least twenty-one (21) Business Days' notice

of the time and date of each meeting, together with an agenda and all

available data and information

relating to the matters to be

considered at that meeting. By notice to the other Parties, any Party

can advise of additional matters which such Party desires to be

considered at the meeting, and provided such notice is given at least

seven (7) Business Days before the date of the meeting, those matters

will be considered.



8.4.2



The Operating Committee shall hold a special meeting upon the request

of any of the Parties. Such request shall be made by notice to all the

other Parties and state the matters to be considered at that meeting.

Upon receiving such request the Operator shall without delay call a

special meeting for a date not less than seven (7) nor more than ten

(10) Business Days after receipt of the request.



8.4.3



For any meeting of the Operating Committee, the period of notice

stipulated above may be waived with the consent of all the Parties.



8.4.4



Any Party not represented at a meeting may vote on any matter on the

agenda for such meeting by either:



8.5



(a)



appointing a proxy in writing; or



(b)



giving notice of such vote to the Operator prior

submission of such matter for vote at such meeting.



to



the



MINUTES





The Chairman of the Operating Committee shall appoint a secretary for

the Operating Committee who will record resolutions and the result of

voting thereon as directed by the meeting or any Party and who will

prepare the minutes and provide each party with a copy thereof not

more than fifteen (15) Business Days after the end of the meeting.

Each Party shall notify all the other Parties of its approval or

disapproval of the minutes within ten (10) Business Days of receipt

thereof. A Party who fails to do so will be deemed to have approved

the minutes. Any minute approved as aforesaid shall be prima facie

evidence of the decisions taken by the Operating Committee in the

meeting to which such minutes relate. The disapproval of any minute as

aforesaid shall not affect the validity of any decision duly taken by

the Operating Committee in the meeting to which such minute relates.

8.6



ACTION



WITHOUT



A



MEETING



8.6.1



The Parties may vote on and determine by notice to the Operator any

proposal which is submitted to them by the Operator by notice and

which they could validly determine at a meeting of the Operating

Committee if duly held for that purpose. Each Party shall cast its

vote within ten (10) Business Days after the proposal is received by

it except that where the Parties are required to vote on and determine

any proposal relating to the deepening, plugging back, testing,

suspension, or abandonment of a well on which drilling equipment is

then located or any other situation where the matter presented for

consideration by its nature requires determination in less than ten

(10) Business Days and such fact and lesser period are so stated in

the notice submitting the proposal, the Parties shall cast their votes

within such lesser period which shall not be less than forty-eight

(48) hours after receipt of the proposal. Failure by a Party to cast

its vote within the relevant period shall be regarded as a vote by

that Party against the proposal.



8.6.2



The Operator shall give prompt notice of the result of any such voting

to the Parties and any decision so taken shall be binding on the

Parties notwithstanding that any Party shall have requested a special

meeting to discuss any such proposal under Article 8.4.2.



8.7



SUB-COMMITTEES

The Operating Committee may establish such advisory sub-committees

it considers desirable from time to time. Liberty shall be entitled

have a representation on any such sub-committee. Each sub-committee

established shall be given written terms of reference and shall



as

to

so

be



subject to such procedures as the Operating Committee shall determine.

The meetings of sub-committees will as far as possible be arranged so

that the minutes of such meetings can be presented to the Parties in

sufficient time for consideration before the next following regular

meeting of the Operating Committee.

8.8

8.8.1



8.8.2



VOTING

Each



PROCEDURE



member



of the Operating Committee shall be entitled to one vote.



Save as otherwise provided in this Agreement including, without

limitation, Article 8.8.4, all decisions of the Operating Committee

shall be taken by majority vote.



8.8.3



Save as otherwise provided in this Agreement, all the Parties shall be

bound by each decision of the Operating Committee duly made in

accordance with the provisions of this Agreement.



8.8.4



Notwithstanding anything herein to the contrary, decisions of the

Operating Committee relating to the following matters shall require

the affirmative vote of all members of the Operating Committee:



8.9



(a)



any modification of or amendment to this Agreement, the Joint

Venture Agreement or the OPL and OML applicable to the Deep Zones

of the IMA Field;



(b)



the selection of a new Operator; or



(c)



any modification of or amendment to any approved Work Programme,

Budget or AFE, if as a result of such modification or amendment

the cost of the Work Programme, Budget or AFE would be altered by

more than 30%.



CONCESSION



8.9.1



PROVISIONS



Working



Obligations



In respect of the working obligations, the Operating Committee

shall, unless and to the extent that relief from such obligations

is sought and obtained from the Ministry, determine the location

and the time at which such obligations are to be discharged.

8.10



NOTIFICATION



8.10.1



TO



THE



COMMITTEE



Information

Notwithstanding anything herein to the contrary, with respect to

any requirement herein that the Operator consult with or inform

the Operating Committee, the Operator shall take all necessary

measures to ensure that all members of the Operating Committee

timely receive adequate notification of such matters and such

reasonable supporting information as any such member may request.



8.11

8.11.1



COSTS

Payment



of



Costs





Each Party shall be solely responsible for the costs incurred by

such Party=s representatives with respect to serving on the

Operating Committee including, without limitation, all expenses

related to attending meetings of the Operating Committee.



ARTICLE IX - PROJECT MANAGER

---------------------------9.1



Pursuant to the terms of this Agreement and Article 6.1.1., the

Operator may appoint a project manager to assist the Operator in the

discharge of its technical and operational functions under this

Agreement.

ARTICLE X - FUNDING OF THE JOINT OPERATIONS

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



10.1



CASH



CALL



Subject to the Joint Venture Agreement, each Party shall pay its

Participating Interest of Petroleum Costs incurred for the Joint

Account and such payment shall be made in accordance with the

following procedure:

10.1.1



10.1.2





10.1.3



10.1.4



The Operator shall, not later than thirty (30) Business Days prior to

the first day of the Cash Call Month, submit to each Party:

(a)



an itemized estimate of such cost and expenditures (hereinafter

the "Estimated Expenditures"), as well as an itemized return of

the actual expenditures for the month (hereinafter the "Actual

Expenditure Month") which is two months preceding the Cash Call

Month (the total expenditure in any Actual Expenditure Month is

hereinafter referred to as the "Actual Expenditure" for such

month);



(b)



an itemization of the cash available or cash deficit in the Joint

Account as the case may be as of such date as well as any credit

expected to be received in the Cash Call Month; and



(c)



such Party's Cash Call for that month which shall be its

Participating Interest share of Estimated Expenditures adjusted

by the case or deficits and credits in (b) above.



Subject to Article 10.1.3, each party shall pay its respective Cash

Call into the Joint Account not later than the due date, which is the

first day of the Cash Call Month. Liberty shall have the right to

request reasonable documentation from Amni evidencing Amni=s deposit

of its portion of the Cash Call in to the Joint Account. Liberty=s

obligation to make payments as provided herein shall be suspended

until such time as Amni provides such reasonable documentation.

The Parties may dispute a Cash Call on the basis that Operator's

estimated expenditure for the Cash Call Month exceeds what costs and

expenditure should reasonably be incurred for the Joint Account for

that month based on the approved Work Programme and Budget. In the

event that the Parties so dispute any portion of a Cash Call, the

Parties shall give to the Operator a notice in writing specifying the

amount in dispute and the reason therefore not later than eight (8)

Days from the date of receipt of such Cash Call. The Parties may not,

however, dispute any portion of a Cash Call required for the

protection of life and property or for the prevention of pollution

pursuant to sub-Article 6.9.2.

The undisputed portion of the Cash Call shall be paid by the Parties

into the Joint Account not later than the due date and the Parties

shall use their best endeavours to resolve the matter on the disputed

portion promptly. Upon settlement, the disputed portion or amount

agreed, as the case may be, shall be paid by the Parties into the

Joint Account not later than ten (10) days from the date of resolution



of the dispute. If the dispute is not settled by the date Parties

receive the Operator's itemized return of actual expenditures for the

Cash Call Month with respect to which the dispute arose, as included

with the submittal referred to in Article 10.1.1(a), provided such

actual expenditures are in accordance with approved Work Programme and

Budget under this Agreement, or are expenses incurred pursuant to

Article 6.9.2, the Parties shall pay the Joint Account, by the due

date of the next Cash Call, or shall receive a credit against the

amount of such Cash Call, as the case may be, the difference between:

(1)



the undisputed portion of the Cash Call with respect to which the

dispute arose and which has already been paid by Parties, and



(2)



the actual expenditure for such Cash Call Month.



10.1.5



Unless otherwise agreed, each Party shall pay its Cash Call entirely

in the currency of the Cash Call.



10.2



PAYMENTS



FOR



JOINT



OPERATIONS



EXPENDITURES



Except as may otherwise be agreed by the Parties, all payments for

Joint Operations expenditures shall be made solely from the Joint

Accounts.

10.3



FAILURE



OF



A



PARTY



TO



PAY



A



CASH



CALL



If a Party fails to meet its Cash Call by the due date specified in

Article 10.1.2 such Party shall become the Defaulting Party and

Article XVIII of this Agreement shall apply.

ARTICLE XI - INSURANCE AND LITIGATION

------------------------------------11.1



INTENTIONALLY





11.2



JOINT



ACCOUNT



DELETED

INSURANCE



The Operator shall at all times while Joint Operations are conducted,

subject to Operating

Committee=s approval on policy terms and

conditions, obtain and maintain for itself and Non-Operator and pay

for, and charge to the Joint Account all insurance in the types and

amounts required by the Joint Venture Agreement and applicable laws,

rules and Regulations in respect of the Joint Property and Joint

Operations, including but not limited to the following:

(a)



employer's liability insurance covering each employee engaged in

the Joint Operations when such employee is not covered by

workmen's compensation;



(b)



comprehensive general third party liability and property damage

insurance covering Joint Operations endorsed to include offshore

operations, seepage and pollution to a limit of not less than US

$15,000,000 or its equivalent in local currency;



(c)



motor vehicle liabilities insurance;



(d)



aviation liability to a limit of not less than US $15,000,000 or

its equivalent in local currency;



(e)



charterer's legal liability insurance to provide coverage arising

out of the use of any chartered barges or vessels;



(f)



marine insurance; and



(g)



any insurance required by any

Operator

in

furtherance

of

contractor's all risk insurance.



contract entered into by the

Joint

Operations

including



11.2.1



The Operator shall obtain and maintain such other insurance at

competitive rates, as may be determined by the Operating Committee.



11.2.2



The insurance carried by the Operator pursuant to Article 11.2 hereof

shall name the

Non-Operator

as

additional

or coinsured and

underwriters shall waive all rights of subrogation in favour of the

Non-Operator and its employees.



11.2.3



In the event that the Operator fails to take out and maintain any of

the insurance policies provided for in Article 11.2, being an

insurance which the Operator is obliged to take out, the Operator

shall be solely responsible for any loss, claims, demands or damages

arising therefrom, except where the Operator has used all reasonable

endeavours to obtain or maintain such insurance but has been unable to

do so and has promptly notified the Non-Operator.





11.2.4



The Operator shall use its best efforts to require all contractors and

subcontractors, if any, to maintain insurance of such types and in

such amounts required by any applicable laws, rules and Regulations or

any decision of the Operating Committee while performing work in

respect to Joint Operations, provided that such insurance policies

shall include waivers of all rights or recourse, by subrogation or

otherwise, against the Parties and their respective Affiliates,

directors, servants, agents and employees. The Operator shall use its

best efforts to require all such contractors to name the Parties as

additional insureds on the contractor's insurance policies.



11.2.5



Where applicable, the Operator shall use reasonable efforts to ensure

that marine drilling rigs and work boats used in Joint Operations are

insured by the owners of such vessels on a full form (hull, tackle and

machinery) or on an all risks form, that adequate protection and

indemnity, collision and tower's liability insurance is maintained by

such owners and that such insurance policies include waivers of all

rights, by subrogation or otherwise, against the Parties and their

respective Affiliates, directors, servants, agents and employees.



11.2.6



The Operator shall in respect of all insurance to be obtained pursuant

to this Article 11.2 from the Effective Date and thereafter before the

end of each year:

(a)



upon notice

approval of

terms and

deductibles



to the Operating Committee, discuss and obtain the

the Operating Committee on premium rates and policy

conditions

including but without

limitation to

and insured value.



(b)



promptly notify the Operating Committee of any loss.



(c)



duly file all claims and take all necessary and proper steps to

collect any proceeds and credit them to the Joint Account.



Notwithstanding anything contained in this Article 11.2.6 herein,

Non-Operators may appoint an insurance broker or brokers to look after

their insured interests hereunder.

11.2.7



The Operator shall, not later than thirty (30) Days from the date of

the issuance of an Insurance Policy or renewal of same pursuant to

this Agreement, furnish Non-Operator with true copies of the Policies

or renewal endorsements with respect to the insurance required under

Article 11.2 hereof.



11.2.8



All policies and certificates of insurance obtained and maintained in

accordance with Articles 11.1 and 11.2 shall state:

(a)



the types and amounts of insurance carried;



(b)



the insurance company or companies underwriting the coverage;



(c)



the effective and expiration dates of all policies;



(d)



that each Party shall be given not less than thirty (30) Days'

advance written notice of any material changes or cancellation of

any policy;



(e)



that a written waiver of subrogation endorsement in favour of the

Party not carrying the insurance has been attached to all

policies of insurance required under Article 11.1 hereof; and



(f)



the territorial limits of all policies.







11.2.9



Liability of Operator under Article 11.2.3 for failure to take out the

insurance required by Article 11.2, except where so agreed to by

Non-Operator in writing, shall not be diminished by the provision of

the information required under Article 11.2.8.



11.2.10



The limits of insurance coverage set forth in Article 11.1 or 11.2 are

meant to be minimum amounts only. Insurance Policies pursuant to this

Article XI shall be obtained and maintained, or extended as the case

may be, by the relevant Party to such further limits as the Operating

Committee shall determine and advised to the Parties, based on the

scope and risk of planned operations.



11.3



INDEMNITY



11.3.1



Except as otherwise provided in this Article XI and in Article 6.2.3,

any loss or damage suffered by the Parties or either of them from

third party claims arising out of the Operator's conduct of the Joint

Operations shall be for the Joint Account. Any loss, damage or costs

suffered by the Operator from claims arising out of the Operator's

conduct of the Joint Operations and any recovery from insurance

provided under Article 11.2 shall be for the Joint Account.



11.3.2



If any Party fails to take out and maintain any insurance policy which

such Party is obliged to take out under Article 11.1, such Party shall

hold harmless and indemnify the other Party from and against all

claims, actions causes of actions, loss and damage suffered by each

other Party arising out of, or in connection with, such failure.



11.4



LITIGATION



11.4.1



The



Operator



(a)



any incidents, accidents or circumstances causing damage to Joint

Property, the cost of which may exceed $250,000 or such lesser

amounts as shall from time to time be determined by the Operating

Committee; and



(b)



any claim, litigation, lien, demand or judgment relating to the

Joint Operations where the total amount in dispute and/or the

total amount of damages together with any costs are estimated to

exceed $100,000, or such lesser amount as shall from time to time

be determined by the Operating Committee.



shall



promptly



notify



the



Parties



of:







The Operator shall have the authority to commence, prosecute, defend,

pursue or settle any claim, litigation, lien, demand or judgment

relating to the Joint Operations (other than between the Parties) both

on behalf of itself and, if appropriate, the other Parties provided

that:

(i)



in the case of any litigation (irrespective of the estimated

amount of damages and costs) to be pursued, prosecuted or

defended otherwise than in any court in Nigeria, the

Operator shall have no such authority without the prior

approval of all the Parties except such authority as may be

necessary:

(1)



to prevent judgment being given against any Party while

full authority of the Parties is being sought; or



(2)



solely to enable the Operator to contest the exercise

by the relevant court of jurisdiction in the matter,

provided that the Operator first obtain legal advice in

the relevant jurisdiction from an appropriate reputable

legal practitioner that the contest itself would not

constitute

submission

by the

Operator

to such

jurisdiction; and



(ii) where the total amount in dispute and/or the total amount of

damages together with any costs are estimated to exceed

$100,000 or such lesser amount as shall from time to time be

determined by the Operating Committee, the Operator shall

have no authority (subject to subparagraph (i) above)

without the prior approval of the Operating Committee.

11.4.2



Any Non-Operator shall promptly notify the other Parties of any claim,

litigation, lien, demand or judgment brought by it or against it

relating to, or which may affect the Joint Operations. If such claim,

litigation, lien, demand or judgment would give rise to any claim for

indemnity under Article 23.2.2, the Operator shall have the authority

to take over the conduct of such claim, litigation, lien, demand or

judgment and Article 11.4.1 shall apply thereto.



11.4.3



Notwithstanding Articles 11.4.1 and 11.4.2, each party shall have the

right to participate in any prosecution, defense or settlement

conducted in accordance with Articles 11.4.1 and 11.4.2 at its sole

cost and expense provided that such participation shall not prejudice

the conduct thereof by the Operator or the interests of the Joint

Operations.





11.4.4



11.5



For the avoidance of doubt it is hereby declared that the conduct of

any litigation involving a Sole Risk Project will be in the hands of

the Participating Party or Parties and at the sole cost and expense of

such Participating Party.

IMA



#11



INSURANCE



PROCEEDS



Attached as Schedule E is the AFE that has been submitted by Abacan to

the insurance carriers with respect the insurance claim resulting from

the blow-out of the IMA #9 well. The Parties agree that all insurance

payments received by Abacan with respect to the re-drill of the IMA

#11 well (the AInsurance Proceeds@) shall be Joint Property with each

Party being deemed to have contributed to the Joint Account its

Participating Interest. Amni acknowledges that Liberty shall conduct

all negotiations with the insurance companies liable for payment with

respect to the IMA #9 well blow-out. Liberty shall attempt to cause

the insurance carriers to fund Insurance Proceeds in such a way that

the contractors drilling the IMA #11 well receive payment directly



from the insurance carriers. Amni agrees to use reasonable efforts to

co-ordinate its operations to facilitate Liberty=s efforts to cause

such direct payment. To the extent Liberty is unable to cause the

insurance carriers to pay the contractors directly, then each Party

shall be responsible for its Participating Interest of Petroleum Costs

of the costs of drilling the IMA #11 well and as and when Insurance

Proceeds are received, each Party shall receive its Participating

Interest of Petroleum Costs of such Insurance Proceeds.

ARTICLE XII - EXPLORATION WORK PROGRAMME AND BUDGET

--------------------------------------------------12.1



ANNUAL



WORK



PROGRAMME



AND



BUDGET



The Operator shall, within sixty (60) Days after the execution of this

Agreement and thereafter on an annual basis not later than September

1st in each Calendar Year submit to the Parties a proposed exploration

Work Programme and Budget for the next Calendar Year (the September 1,

1998 delivery shall also include the Work Programme and Budget for the

remainder of the 1998 Calendar Year), showing:





12.1.2



(a)



Joint Operations to be performed in the Deep Zones of the IMA

Field and other work to be undertaken;



(b)



the information required under the Account Procedure; and



(c)



such other information as the Operating

required the Operator to provide.



Committee



shall have



The proposed exploration Work Programme and Budget shall be subject to

consideration, revision and approval by the Operating Committee and

the Parties. The Operating Committee shall consider such exploration

Work Programme and Budget and make such revisions thereto as shall be

agreed as soon as practicable but in any event not later than November

30. Not later than December 31, the Operating Committee shall approve

an exploration Work Programme and Budget and such approval shall,

subject to Articles 12.2 and 12.3 authorize and oblige the Operator to

proceed with it.



12.2



AUTHORIZATION



FOR



EXPENDITURE



12.2.1



Such as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator

shall,

before

entering into any

commitment or incurring any

expenditure under an approved exploration Work Programme and Budget,

submit to each Non-Operator an AFE. An AFE shall be prepared in

accordance with Section 3 of the Uniform Project Implementation

Procedure. Subject to the approval of the AFE hereunder, the Operator

shall be authorized and obliged, subject to Article 12.3, to proceed

with such commitment or expenditure. An AFE shall be approved by

affirmative decision of a majority of the Operating Committee or by

signature of the Parties having an aggregate Participating Interest

sufficient for an affirmative decision of the Operating Committee.



12.2.2



In the event that the Operating Committee gives its approval to any

exploration

Work Programme and Budget or any AFE executed in

connection therewith, Liberty may, by notice to AMNI given not more

than thirty (30) Days following the date of Liberty's receipt of

notice of such approval, elect not to proceed with such Work Programme

and Budget or AFE as applicable, and the operations and work covered

by such Work Programme and Budget or AFE shall be conducted as Sole

Risk Operations in accordance with Article XVI with AMNI being the

Sole Risk Party.



12.3



AMENDMENT

At any time either Party may, by notice to the Operating Committee,

propose that an approved exploration Work Programme and Budget and/or

an approved AFE be amended. The Operating Committee shall consider

such proposal and, if the Operating Committee so requires, the

Operator shall prepare and submit to the Parties a revised exploration

Work Programme and Budget incorporating any such amendment and showing

the matter listed in Article 12.1.1 and the information required under

Section 3 of the Uniform Project Implementation Procedure. To the

extent that an amendment is approved by the Operating Committee, the

approved exploration Work Programme and Budget and/or AFE shall be

amended accordingly provided always that any such amendment shall not

invalidate any authorized commitment or expenditure made by the

Operator prior thereto, provided that any revised Work Programme and

Budget or AFE shall be subject to Liberty's rights under Article

12.2.2.





ARTICLE XIII - APPRAISAL WORK PROGRAMME AND BUDGET

-------------------------------------------------13.1



JOINT



WORK



13.1.1



In the event of a Discovery, the Operator shall, if the Operating

Committee so decides and as soon as Practicable after such decision,

submit to each Non-Operator a proposed appraisal Work Programme and

Budget for such Discovery showing:



(a)



the



wells to be drilled and other projects and work to be undertaken;



(b)



the



information



(c)



details

and



(d)



such other information as the Operating Committee shall have required

the Operator to provide.



13.1.2



The proposed appraisal Work Programme and Budget shall be subject to

consideration, revision and approval by the Operating Committee. The

Operating Committee shall as soon as practicable consider such

appraisal Work Programme and Budget and make such revisions thereto as

shall be agreed. If the Operating Committee approves an appraisal Work

Programme and Budget, such approval shall be subject to Articles 13.2

and 13.3, authorize and oblige the Operator to proceed with it.



13.2



AUTHORIZATION



13.2.1



Save as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator

shall,

before

entering into any

commitment or incurring any

expenditure under an approved appraisal Work Programme and Budget,

submit to the Operating Committee an AFE therefor. An AFE shall be

prepared in accordance

with Section 3 of the Uniform Project

Implementation Procedure.

Subject to the approval of such AFE

hereunder, the Operator shall be authorized and obliged, subject to

Article 13.3, to proceed with such commitment or expenditure. An AFE

shall be approved by affirmative decision of the Operating Committee.



13.2.2



In the event that the Operating Committee gives its approval to any

appraisal Work Programme and Budget or any AFE executed in connection

therewith, Liberty may, by notice to AMNI given not more than twenty

(20) Days following the date of Liberty's receipt of notice of such

approval or of such AFE, elect not to proceed with such Work Programme

and Budget or AFE as applicable, and the operations and work covered



of



PROGRAMME



the



FOR



AND



required



BUDGET



under



the



Accounting



Procedure;



number of employees and contract personnel required;



EXPENDITURE



by such Work Programme and Budget or AFE shall be conducted as Sole

Risk Operations in accordance with Article XVI with AMNI being the

Sole Risk Party.



13.3



REVIEW



AND



AMENDMENT



13.3.1



The Operator shall, as and when required by the Operating Committee,

review the approved appraisal Work Programme and Budget and submit to

the Parties a report thereon.



13.3.2



At any time either party may, by notice to the other Party propose

that an approved appraisal Work Programme and Budget and/or an

approved AFE be amended. The Operating Committee shall consider such

proposal and, if the Operating Committee so requires, the Operator

shall prepare and submit to the Parties a revised appraisal Work

Programme and Budget incorporating any such amendment and showing the

matter listed in Article 13.1.1 and the information required under

Section 3 of the Uniform Project Implementation Procedure. To the

extent that any such amendment or revised appraisal Work Programme and

Budget is approved by the Operating Committee, the approved appraisal

Work Programme and Budget and/or AFE shall be amended accordingly,

provided always that any such amendment shall not invalidate any

authorized commitment or expenditure made by the Operator prior

thereto, and further provided that any revised Work Programme and

Budget or AFE shall be subject to Liberty's rights under Article

13.2.2.

ARTICLE XIV - DEVELOPMENT WORK PROGRAMME AND BUDGET

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



14.1



JOINT



14.1.1



The Operator shall, if the Operating Committee so decides and as soon

as practicable after such decision, submit to the Non-Operators a

proposed development Work Programme and Budget for a Discovery

showing:



(a)



the



projects



(b)



the



information



(c)



the

the



manner in which the development is to be managed with details of

number of employees and contract personnel required;



(d)



the estimate

annual rates



(e)



such other information as the Operating Committee shall have required

the Operator to provide.





14.1.2



WORK



PROGRAMME



and



of

of



AND



other

required



BUDGET



work

under



to



be

the



undertaken;

Accounting



Procedure;



the date of commencement of production and of the

production; and



The proposed development Work Programme and Budget shall be subject to

consideration, revision and approval by the Operating Committee. The

Operating Committee shall meet to consider such development Work

Programme and Budget as soon as practicable and to make such revisions

thereto as shall be agreed. Unless the Operating Committee otherwise

agrees to an earlier date, the Operating Committee shall approve or

reject the development Work Programme and Budget within thirty (30)

Days of its submission by the Operator to the Parties provided that,

within the said period of thirty (30) Days any Party wishing to carry

out further work or studies in connection with the development of the

Discovery may, by notice to the other Party specifying the further

work or studies, require that the said period be extended up to a

maximum total period of:



(a)



in the case of the carrying out of further appraisal drilling of the

Discovery, ninety (90) Days; and



(b)



in



all



other



cases,



sixty



(60)



Days;



and in such event the said period shall be so extended. A Party proposing to

carry out further appraisal drilling of the Discovery shall, in its said notice

to the other Party, inform them of its intention and:

(i)



the Operator shall carry out such drilling at the risk, cost and

expense of such Party and the provisions of Article XVI (other than

the first sentence of Article 16.3) shall apply as if such Party were

a Sole Risk Party and such drilling were Sole Risk Operation under

that Article;



(ii)



such Party shall not be entitled to any reimbursement from the other

Party of the costs and expenses thereof, unless as a result of such

drilling all the Parties decide not to proceed with the development of

the Discovery in which event the other Party shall pay to such Party

within twenty-eight (28) Days of the decision not to proceed with the

development an amount equal to the lesser of the amount it would have

contributed to the Joint Account had such additional drilling or work

been carried out as part of the Joint Operations or its share of the

additional costs incurred; such amount shall be paid in Dollars or

other approved currencies as approved by the Parties applicable to the

costs and expenses; and



(iii)



all data and information obtained from such additional drilling and

work shall promptly be made available to, and be owned jointly by, all

the Parties.



14.2



AUTHORIZATION





14.2.1



FOR



EXPENDITURE



Save as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator

shall,

before

entering into any

commitment or incurring any

expenditure with respect to the preparation of a development Work

Programme and Budget or under an approved development Work Programme

and Budget, submit to the Operating Committee an AFE therefor. An AFE

shall be prepared in accordance with Section 3 of the Uniform Project

Implementation Procedure.

Subject to the approval of such AFE

hereunder, the Operator shall be authorized and obliged, subject to

Article 14.3, to proceed with such commitment or expenditure provided

always that an AFE within an approved development Work Programme and

Budget shall be deemed to have been approved by the Operating

Committee unless, within fourteen (14) Days (or such longer period as

shall have been agreed by the Parties) of its submission to the

Parties, any Party gives notice to the Operator that they require such

AFE to be formally approved by the Operating Committee.



14.2.2



In the event that the Operating Committee gives its approval to any

development

Work Programme and Budget or any AFE executed in

connection therewith, Liberty may, by notice to AMNI given not more

than thirty (30) Days following the date of Liberty's receipt of

notice of such approval of such Work Programme, Budget or AFE, elect

not to proceed with such Work Programme, Budget or AFE as applicable,

and the operations and work covered by such Work Programme, Budget or

AFE shall be conducted as Sole Risk Operations in accordance with

Article XVI with AMNI being the Sole Risk Party.



14.3



REVIEW



14.3.1



The Operator shall, in each Year, review the approved development Work

Programme and Budget and submit to the Operating Committee not later



AND



AMENDMENT



than September 1st a report thereon together with an update of such

development Work Programme and Budget dealing separately with the next

Year and the remaining phase of the approved development Work

Programme and Budget and showing the matters listed in Article 14.1.1

and the information required under Section 3 of the Uniform Project

Implementation Procedure.

14.3.2



At any time either Party may, by notice to the other Party propose

that an approved development Work Programme and Budget and/or an

approved AFE be amended. The Operating Committee shall consider such

proposal and, if the Operating Committee agrees to such an amendment,

the Operator shall prepare and submit to the Operating Committee a

revised development Work Programme and Budget incorporating any such

amendment and showing the matters listed in Article 14.1.1 and the

information under Section 3 of the Uniform Project Implementation

Procedure.

To the extent that any such

amendment or revised

development Work Programme and Budget is approved by the Operating

Committee, the approved development Work Programme and Budget and/or

AFE shall, subject to obtaining any necessary consent or approval of

the Ministry, be deemed amended accordingly provided always that any

such amendment shall not invalidate any authorized commitment or

expenditure made by the Operator prior thereto, and further provided

that any revised Work Programme and Budget or AFE shall be subject to

Liberty's rights under Article 14.2.2.

ARTICLE XV - PRODUCTION WORK PROGRAMME AND BUDGET

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





15.1

15.1.1



15.1.2



ANNUAL



PROGRAMME



AND



BUDGET



The Operator shall not later than September 1st in the year prior to

the commencement of production and each subsequent Year, submit to the

Operating Committee a proposed production Work Programme and Budget

for the Year showing:

(a)



the projects and other work to be undertaken;



(b)



the information required under the Accounting Procedure:



(c)



an estimate of the date of commencement of production (if

approximate) and of the total production by Quarters and the

maximum daily rate to be achieved in each Quarter;



(d)



details of the

required; and



(e)



such other information as the Operating

required the Operator to provide.



number



of



employees



and



contract

Committee



personnel

shall have



The proposed production Work Programme and Budget shall be subject to

consideration, revision and approval by the Operating Committee. The

Operating Committee shall consider such production Work Programme and

Budget and make such revisions thereto as shall be agreed as soon as

practicable but in any event not later than October 1st. Not later

than December 31st the Operating Committee shall approve a production

Work Programme and Budget and such approval shall subject to Articles

15.2 and 15.3 authorize and oblige the Operator to proceed with it.



15.2 AUTHORIZATION

15.2.1



WORK



FOR



EXPENDITURE



Save as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator

shall,

before

entering into any

commitment or incurring any

expenditure under an approved Work Programme and Budget, submit to the

Operating Committee an AFE therefor. An AFE shall be prepared in



accordance with Section 3 of the Uniform Project Implementation

Procedure. Subject to the approval of the AFE hereunder, the Operator

shall be authorized and obliged, subject to Article 15.3, to proceed

with such commitment or expenditure. An AFE may be approved by

affirmative decision of the Operating Committee or by signature by

Parties having an aggregate Participating Interest sufficient for an

affirmative decision of the Operating Committee.



15.2.2



In the event that the Operating Committee gives its approval to any

production Work Programme and Budget or any AFE executed in connection

therewith, Liberty may, by notice to AMNI given not more than thirty

(30) Days following the date of Liberty's receipt of notice of such

approval or of such AFE, elect not to proceed with such Work Programme

and Budget or AFE as applicable, and the operations and work covered

by such Work Programme and Budget or AFE shall be conducted as Sole

Risk Operations in accordance with Article XVI with AMNI being the

Sole Risk Party.



15.3 AMENDMENT

At any time either Party may, by notice to the Operating Committee, propose

that an approved production Work Programme and Budget and/or an approved

AFE be amended. To the extent that an amendment is approved by the

Operating Committee, the approved production Work Programme and Budget

and/or AFE shall be deemed amended accordingly provided always that any

such amendment

shall not

invalidate any authorized

commitment or

expenditure made by the Operator prior thereto, and further provided that

any revised Work Programme and Budget or AFE shall be subject to Liberty's

rights under Article 15.2.2.

ARTICLE XVI - SOLE RISK OPERATIONS

---------------------------------16.1 DEFINITIONS

For



the



purpose



of



this



Article



XVI:



16.1.1



"Common Costs" means overhead expenses in respect of operating and

maintenance charges and depreciation on common user assets which are

shared by Sole Risk Operations and Joint Operations.



16.1.2



"Exploratory



Well"



means:



(a)



a well drilled in the Deep Zones of the IMA Field in an area

lying outside the interpreted closure of any structural or

stratigraphic trap on which closure a well has been drilled which

is capable of producing Petroleum, or



(b)



a well in the Deep Zones of the IMA Field in any area lying

inside the interpreted closure of any structural or stratigraphic

trap, to the extent to which it is deepened or plugged back to a

stratigraphic

level

different from that to which it had

previously been drilled and found capable of producing Petroleum;

or



(c)



any well that has been agreed by the Parties to be an Exploratory

Well.



16.1.3



"Non-Proposing Party/ies" means the Parties not giving

intention to conduct a Sole Risk Operation.



16.1.4



"Non-Sole Risk Party/ies"

Sole Risk Operation.



means the parties not



notice of an



participating



in a





16.1.5



"Production Facilities" means drilling and/or production, platforms

and/or petroleum storage and transportation facilities required to

produce and deliver any Petroleum that may be discovered from an

Exploratory Well within the Deep Zones of the IMA Field.



16.1.6



"Proposing Party/ies" means the Parties giving notice of its intention

to conduct a Sole Risk Operation as hereinafter defined.



16.1.7



"Sole Risk Exploratory Well" means an Exploratory

Sole Risk Party/ies pursuant to this Article XVI.



16.1.8



"Sole Risk Notice" means a notice given pursuant to Article 16.4 of a

Party's intention to conduct a Sole risk Operation.



16.1.9



"Sole Risk Operation" means an operation conducted for only one of the

Parties in accordance with the provisions of this Article XVI.



16.1.10



"Sole Risk Party/ies" means the Party/ies who undertakes to conduct a

Sole Risk Operation pursuant to this Article XVI.



16.2 SOLE



RISK



Well drilled by a



OPERATIONS



Subject to Article 16.3, Sole Risk Operations shall only include and be

undertaken in respect of any one or more of the following activities:

(a)



the deepening, side tracking or plugging back of an Exploratory Well;



(b)



the drilling

programmes;



(c)



the drilling of appraisal and development wells and the installation

of Production Facilities to develop a discovery made by a Sole Risk

Exploratory Well, provided the purchase of such Facilities is not

otherwise to increase or accelerate production of Petroleum from

geological structures in the Deep Zones of the IMA Field other than

the geological structure on which such Sole Risk Exploratory Well was

Drilled;



(d)



any other activity or project

as a Sole Risk Operation; and



(e)



any operation governed by a Work Programme and Budget or an AFE made

pursuant to Articles XII, XIII, XIV or XV for which Liberty has

elected not to participate in pursuant to the terms of such Articles.



16.3 CONDITIONS



(a)



(b)



FOR



of an



SOLE



Exploratory



RISK



Well



including



testing and coring



agreed by the Parties to be undertaken



OPERATIONS



No Sole Risk Operation may be conducted if it would adversely affect

Joint Operations or conflict with all or any part of any current Work

Programme and Budget.

No Sole Risk Operation shall be undertaken until:

(i)



The operations comprising the Sole Risk Operation shall first

have been proposed in writing to the Operating Committee in

complete form. The appropriate proposal to be in complete form

shall specify as Joint Operations such as location of proposed

well, scope of geological and geophysical programmes, proposed

depth, itemized estimate of the costs thereof, economic analysis,

expected

date of

commencement

and the expected date of

completion.



(ii) The Operating



Committee



shall have



disapproved or be deemed to



have disapproved the proposal,

set forth in Article VIII.

(c)



16.4 SOLE



in accordance with the procedures



A Sole Risk Operation for the deepening or sidetracking of an

Exploratory Well in course of drilling may be proposed only if such

well has not encountered a Discovery and the Parties have decided to

abandon the well following their receipt of all drilling and Test

results.

RISK



NOTICE



Within 6 months after the Operating Committee disagrees with a proposal for

Joint Operations or, in the case of Article 16.3 (c) within forty-eight

(48) hours after notice from the Operator recommending abandonment of an

Exploratory Well, any Party may give to the other Party a Sole Risk Notice,

in writing. The Non-Proposing Party shall have ninety (90) Days, after the

receipt of the sole Risk Notice, within which to notify the Party giving

the Sole Risk Notice, whether or not to participate in the costs of such

Sole Risk Operation ("Participation Notice"); provided, however, that in

the case of a Sole Risk activity pursuant to Article 16.3(c) the period in

which to give Participation Notice shall be forty-eight (48) hours.

16.5 SOLE



RISK



OPERATION



AS



JOINT



OPERATION



If the Non-Proposing Party elects to participate in the proposal which is

the subject of a Sole Risk Notice within the applicable period specified in

Article 16.4, such Sole Risk Operation shall be carried out by the Operator

as Joint Operation and the current Work Programme and Budget shall be

deemed to be amended accordingly.

16.6 SOLE



RISK



OPERATION





In the event the Non-Proposing Party does not elect, within the applicable

period specified in Article 16.4 to participate in a proposed Sole Risk

Operation, the Proposing Party shall be entitled to carry out the Sole Risk

Operation at its Sole Risk, cost and expenditure. Costs and expenses of the

Sole Risk Operation incurred by the Sole Risk Party shall be computed in

accordance with the Accounting Procedure.

16.7 OPERATOR



OF



SOLE



RISK



OPERATION



Notwithstanding that the Operator may not be the Sole Risk Party, the Sole

Risk Operation shall, subject to Article 16.7.3 and Article 16.8, be

carried out promptly and diligently by the Sole Risk Operator for the sole

account and benefit of the Sole Risk Party.

16.7.1



Any Sole Risk Operation shall be carried out at the sole risk, cost

and expense of, and under the overall supervision and control, of the

Sole Risk Party but otherwise pursuant to this Agreement.



16.7.2



The Sole Risk Operator shall keep and maintain separate books, records

and accounts (including bank accounts) with respect to the Sole Risk

Operations,

including Sole Risk share of all Common Costs in

connection therewith,

which shall be subject to the right of

examination and audit by the Sole Risk Party and Non-Consenting Party.



16.7.3



The Sole Risk Party shall be obligated to advance the estimated

expenditure for the Sole Risk Operation to the Operator within fifteen

(15) Days after receipt of the Operator's request therefor. The

Operator shall not use, or be required to use, Joint Account funds or

its own funds for the purpose of paying the costs and expenses of the

Sole Risk Operation.



16.8 COMMENCEMENT



OF



SOLE



RISK



OPERATION



It is hereby understood and agreed that the Sole Risk Party shall do all

things necessary to enable the Operator on its behalf to commence the Sole

Risk Operation within ninety (90) Days after expiration of the period

specified in Article 16.4 for giving a Participation Notice in the case of

a Sole Risk Operation under Articles 16.2(a), (b), (c) or (e); or within

one hundred eighty (180) Days after expiration of the period specified in

Article 16.4 for giving a Participation Notice in case of projects under

Article 16.2(d); or within 48 hours after expiry of the period specified in

Article 16.4 for giving a Participation Notice in case of projects under

Article 16.3(c). If the Sole Risk Operation specified in the Sole Risk

Notice is not commenced within the period specified in this Article 16.8

for reasons attributable to the Proposing Party, then the right of the

Proposing Party to carry out the Sole Risk Operation shall lapse.

16.9 INFORMATION



CONCERNING



SOLE



RISK



OPERATION



The Operator shall, in relation to the Sole Risk Operation, furnish to the

Parties all information and data which the Operator is obligated to give

the Non-Operators under the terms of this Agreement.



16.10 ELECTION



TO



PARTICIPATE



IN



FURTHER



WORK



A Non-Consenting Party may at any time, elect to participate in a Sole Risk

Operation by paying to the other

Party,

an amount equal to its

Participating Interest of Petroleum Costs share of the cumulative cost and

expenditure of the Sole Risk Operation, incurred as of the date of such

election plus 250% thereof ("Re-entry Penalty"). The whole or any part of

the Re-entry Penalty shall be paid in cash in the currency in which the

Sole Risk costs have been incurred or in kind or both as may be mutually

agreed by the Parties. Following an election and payment as aforesaid, such

operations shall be carried out as Joint Operations.

16.11



USE OF JOINT

OPERATION



PROPERTY



AND PERSONNEL



OF



THE



OPERATOR FOR SOLE RISK



A Sole Risk Party shall be entitled to use Joint Property and personnel of

the Operator for the Sole Risk Operation upon terms and conditions agreed

by the Parties, provided however that it is understood that, at all times,

the Joint Operations shall take precedence over the Sole Risk Operation in

such use of Joint Property and personnel.

16.12 INDEMNIFICATION



OF



THE



NON-CONSENTING



PARTY



The Sole Risk Party shall indemnify and hold harmless the Non-Consenting

Party from all suits, claims, liens, liabilities, damages, costs, losses

and expenses whatsoever directly or indirectly caused to third parties or

incurred by the Non-Consenting Party as a result of anything done or

omitted to be done in the course of carrying out the Sole Risk Operation.

16.13 TITLE



TO



THE



SOLE



RISK



OPERATION,



PRODUCTION



AND



FACILITIES



16.13.1



Subject to Article 16.10, all property acquired through a Sole Risk

Operation, including data and information, shall be wholly owned by

the Sole Risk Party.



16.13.2



In case of a Sole Risk Operation under Article 16.2(d) the relevant

facilities as well as any Petroleum produced therefrom shall be owned

by the Sole Risk Party until such time as the Non-Consenting Party has

elected to participate in further work under the Sole Risk Operation

pursuant to Article 16.10.



16.13.3



Notwithstanding the election of a Non-Consenting Party to participate

in a Sole Risk Operation involving production of Petroleum discovered



as the result of a Sole Risk Exploratory Well, and the payment by the

Non-Consenting Party of the amount of money referred to in Article

16.10, the Non-Consenting Party shall not be entitled to receive any

payment in kind of cash or credit for any Petroleum which was produced

as a result of a discovery from such Exploratory Well prior to the

date of such election and payment. Upon such election and payment

however

the

Non-Consenting

Party

shall be

entitled to its

Participating Interest of Petroleum produced as a result of a

discovery from such Exploratory Well following such election and

payment.



ARTICLE XVII - ACCOUNTING PROCEDURE

----------------------------------17.1



The Accounting Procedure is hereby made part of this Agreement. In the

event of any conflict between any provision in the main body of this

Agreement and any provision in the Accounting Procedure, the provision

in the main body shall prevail.

ARTICLE XVIII - DEFAULT

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



18.1



FAILURE



TO



PAY



If any Party ("Defaulting Party") fails to pay in full its share of

any Cash Call or Advance by the due date as provided in Article X or

elsewhere in this Agreement (including all schedules thereto) (such

date being hereinafter the "Default Date"):

(i)



the Operator shall notify by telex all the Parties

default as soon as practicable after the occurrence

default;



of such

of such



(ii) after the occurrence of such failure to pay, the Operator shall

serve on the Defaulting Party a formal notice (a "Default

Notice") declaring that the Defaulting Party is in default from

and including the Default Date;

(iii)each Non-Defaulting Party shall contribute,

as hereinafter

provided, a share of the amount of default in the proportion that

its

Participating

Interest

bears

to the

total of the

Participating

Interests of the Non-Defaulting Parties, and

pending receipt of such additional contributions the Operator

shall make arrangements to meet any commitments falling due by

borrowing the necessary finance from outside sources or by making

the necessary finance available itself and all costs of any such

finance shall be charged to the Non-Defaulting Parties; finance

made available to the Operator shall bear interest calculated on

a day to day basis at the Agreed Interest Rate;

(iv) within five (5) Working Days following the date of notification

by the Operator under Article 18.1(i), the Operator shall notify

all the Parties of the liability of each of the Non-Defaulting

parties to contribute to the amount in default and shall make a

further Cash Call accordingly to take effect on the expiry of the

six (6) Business Days specified in Article 18.1(v);

(v)



if such default continues for than six (6) Working Days after the

date of notification by the Operator under Article 18.1(i) each

of the Non-Defaulting Parties shall on the Business Day next

following such sixth Business Day pay the amount notified under

Article 18.1(iv), and thereafter shall continue to pay, in

addition to its share of subsequent Advances, the proportion

specified in Article

18.1(iii) of that part of all such



subsequent Advances attributable to the Defaulting Party until

such time as the Defaulting Party has remedied its default in

full, and failure by a Party to make such payment on behalf of a

Defaulting Party shall likewise and with the same results render

that Party in default; and



(vi) no Party shall be entitled at any time to call into question any

aspect of the Default Notice or its service on the Defaulting

Party other than on the grounds (a) that the Defaulting Party had

not failed to pay in full its share of any Cash Call or Advance

by the due date as aforesaid, (b) that any such failure was not

continuing at the date of service of the Default Notice (whether

in respect of the whole or any part of the amount which the

Defaulting Party failed to pay as aforesaid), (c) that the

Default Notice was not served on the Defaulting Party.

18.2



REMEDY



OF



DEFAULT



The Defaulting Party shall have the right to remedy the default at any

time by payment in full to the Operator or, if the Non-Defaulting

Party has paid any

amounts

under

Article

18.1(v),

to the

Non-Defaulting Party, in proportion to the amounts so paid by the

Non-Defaulting Party of all amounts which the Defaulting Party has

failed to pay (including the amount of Cash Calls and Advances

attributable to the Defaulting Party which the Non-Defaulting Party

has become liable to pay in terms of Article 18.1(v) together with

interest thereon calculated on a day to day basis at the Agreed

Interest Rate, from and including the due date for payment of such

amounts until but not including the actual date of payment.

18.3



CONTINUATION



OF



DEFAULT



18.3.1



If a Party defaults after the

commencement of commercial

production and has not remedied the default by the sixth Business

Day after Notice thereof from the Operator, the Defaulting Party

shall not be entitled to its Participating Interest of Production

which shall vest in and be the property of the Non-Defaulting

Parties in the proportions which their respective Percentage

Interests of Petroleum Costs bear to the total of the same, and

Operator shall be authorized to sell such Petroleum, at the best

price obtainable under the circumstances and, after deducting all

reasonable costs, charges and expenses incurred by Operator in

connection with such sale, pay the proceeds proportionately to

the Non-Defaulting Parties which proceeds shall be credited

against all monies advanced pursuant to Article 18.1 together

with interest accrued thereon. Any surplus remaining shall be

paid to the Defaulting Party, and any deficiency shall remain a

debt due from the Defaulting Party to the Non-Defaulting Parties.



18.3.2



During the continuation of any default the Defaulting Party shall

not be entitled to be represented at meetings of the Operating

Committee or any sub-committee thereof nor to vote thereat (so

that the voting interest of each Non-Defaulting Party shall be in

the proportion which its Participating Interest bears to the

total of the Participating Interest of all the Non-Defaulting

Parties) and shall have no further access to any data and

information relating to the Joint Operations. The Defaulting

Party shall be bound by decisions of the Operating Committee made

during the continuation of default.





18.4



In the case of any Sole Risk Project pursuant

provision of this clause 18 shall apply mutatis

Risk Parties.



to clause 16, the

mutandis to the Sole



18.5



From the Default Date the Defaulting Party shall have no further

rights with respect to the Deep Zone of the IMA Field or this

Agreement except as provided for in this clause 18.



18.6



OTHER



REMEDIES



All remedies provided hereunder shall be without prejudice to any

other rights available to the Non-Defaulting Parties whether at common

law, pursuant to statute or otherwise.

ARTICLE XIX - DISPOSITION OF PRODUCTION

--------------------------------------19.1



RIGHT



AND



OBLIGATION



TO



TAKE



IN



KIND



Except with respect to Tax Oil or as otherwise provided in this

Article, each Party shall have the right and obligation to own, take

in kind and separately dispose of its Participating Interest of

Production from any Exploitation Area in such quantities and in

accordance with such procedures as may be set forth in the offtake

agreement referred to in Article 19.2 or in the special arrangements

for natural gas referred to in Article 19.3. If Government is party to

the offtake agreement, then the Parties shall endeavour to obtain its

agreement to the principles set forth in this Article.

19.2



OFFTAKE



AGREEMENT



FOR



CRUDE



OIL



If Crude Oil is to be produced from an Exploitation Area, the Parties

shall in good faith, and not less than three (3) months prior to first

delivery of Crude Oil, negotiate and conclude the terms of an

agreement to cover, the offtake of Crude Oil produced under the Joint

Venture Agreement, which agreement shall also provide for the sale of

the Tax Oil by the Operator. The Government may, if necessary and

practicable, also be party to the offtake agreement. This offtake

agreement shall to the extent possible be consistent with the Joint

Venture Agreement, and make provision for:

(a)



The delivery

point, at which title and risk of loss of

Participating Interest of Production of Crude Oil shall pass to

the Parties (or as the Parties may otherwise agree);



(b)



The Operator's

regular periodic advice to the Parties of

estimates of totalavailable production for succeeding periods,

Participating Interest of Production and grades of Crude Oil, for

as far ahead as is necessary for the Operator and the Parties to

plan offtake arrangements. Such advice shall also cover for each

grade of Crude Oil total available production and deliveries for

the preceding period, inventory and overlifts and underlifts;



(c)



Nomination by the Parties to the Operator of acceptance of their

Participating

Interest of

Production

of total

available

production for the succeeding period. Such nominations shall in

any one period be for each Party's entire Participating Interest

of Production arising during that period subject to operational

tolerances and agreed minimum economic cargo sizes or as the

parties may otherwise agree;



(d)



Elimination of overlifts and underlifts;



(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;









19.3



(f)



Distribution to the Parties of Entitlements to ensure, to the

extent Parties take delivery of their Entitlements in proportion

to the accrual of such Entitlements, that each Party shall

receive currently Entitlements of grades, gravities and qualities

of Petroleum similar to Petroleum received by each other Party.



(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 option and the right of the other Parties to sell an

Entitlement which a Party fails to nominate for acceptance

pursuant to (c) above or of which a Party fails to take delivery,

in accordance with applicable agreed procedures, provided that

such failure either constitutes a breach of the Operator's or

Parties' obligations under the terms of the Contract, 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 Joint Operations. The Operator shall give all

Parties as much notice as is practicable of such situation and

that a sale option has arisen. Any sale shall be of the

unnominated or undelivered Entitlement as the case may be and for

reasonable periods of time as are consistent with the minimum

needs of the industry and in no event to exceed twelve (12)

months. The right of sale shall be revocable at will subject to

any prior contractual commitments. Sales to non-affiliated third

parties shall be for the realized price f.o.b. the delivery

point. Sales to any of the Parties or their Affiliates shall be

at current market value f.o.b. the delivery point. The Party

arranging the sale shall pay to the Party whose Entitlement is

involved the above price after deduction of all costs, including

storage costs, incurred in respect of such sale and a marketing

fee of an agreed percentage of the applicable price less

deductions, reflecting actual costs of disposal at immediate

notice.

Current

market value shall be the value of the

Entitlement in international markets (unless the Entitlement was

required to be delivered into the Government's domestic market,

in which case it shall be the value therein between a willing

buyer and seller and shall be agreed between the two Parties

concerned, or failing agreement, determined by an expert to be

appointed in accordance with procedures set forth in the offtake

agreement.



SEPARATE



AGREEMENT



FOR



NATURAL



GAS



The Parties recognize that if natural gas is discovered it may be

necessary for the Parties to enter into special arrangements for the

disposal of the natural gas, which are consistent with the Development

Plan and subject to the terms of the Joint Venture Agreement.

ARTICLE XX - CONFIDENTIALITY

---------------------------20.1



CONFIDENTIALITY



DATA



AND



INFORMATION



All data and information (the "Data") acquired or obtained by any

Party in respect of the Joint Operations and under or pursuant to this

agreement shall be considered

confidential

and shall be kept

confidential and not be disclosed during the term of this Agreement

and for a period of five (5) years thereafter and shall not be

divulged in any way to any third party without the prior written

approval of all the Parties, provided that:

(a)



any Party may,



without such approval,



disclose the whole or any



part of the Data in good faith:

(i)



to any Affiliate of such Party upon obtaining an undertaking

of confidentiality (in similar terms to this Article 20.1)

from such Affiliate;



(ii) to any bona fide prospective assignee of such part upon

obtaining an undertaking of confidentiality (in similar

terms to this Article 20.1) from such assignee and subject

to such Party having given not less than two (2) Business

Days' notice to the other Parties specifying the extent to

which that Party intends to disclose the Data to the

prospective assignee and the name of such prospective

assignee;

(iii)to any outside professional consultants engaged by or on

behalf of such Party and acting in that capacity, upon

obtaining an undertaking of confidentiality (in similar

terms to this Article 20.1) from such consultants, provided

that such Party shall promptly inform the other Parties of

the name of such consultants and the data disclosed to them;

(iv) to any bank or financial institution from whom such Party is

seeking or obtaining an undertaking of confidentially (in

similar term to this Article 20.1) from such bank or

institution;

(v)



to the extent required by the Act, the OPL and OML governing

the Deep Zones of the IMA Field, any other applicable law or

the Regulations of the Ministry;



(vi) to the extent that the same has become generally available

to the public other than as a result of any breach by such

Party of its obligations hereunder;



(vii)pursuant

to an

jurisdiction; or



(b)



order



of



any



court



of



competent



(viii) any government, stock exchange or securities

having jurisdiction over such Party.



commission



the Operator may disclose the Data to such persons as may be

necessary in connection with the conduct of the Joint Operations

upon obtaining an undertaking of confidentiality (in similar

terms to this Article 20.1) from such persons provided that the

Operator shall promptly inform the other Parties of the names of

such persons and of the Data disclosed to them.



In the event of any Party ceasing to hold a Participating Interest,

such Party shall nevertheless remain bound by this Article 20.1.

20.2



TRADING



RIGHTS



20.2.1



The Operator may, with the prior approval of the Operating Committee

and on such terms and conditions as it shall approve, exchange any

Data for other similar data and information and the Operator shall

promptly provide all the Parties as shall request the same with

conformed copies of the agreement relating to such exchange and all

such other data and information provided that, notwithstanding the

foregoing provisions of this Article XX, if any Party is also the

owner or part owner of such other data and information it shall not be

entitled to prevent an exchange which has been approved by all the

other Parties.



20.2.2



A Party having acquired any data and information by the conduct of a

Sole Risk Project undertaken under Article XVI shall have the right to

take such data and information as its exclusive property without

seeking the prior approval of the Non-Consenting Parties, save that if

the Non-Consenting Party in accordance with Article 14.4 such data and

information shall thereafter become Joint Property and be subject to

the restrictions imposed by Article 20.1.

ARTICLE XXI - PUBLIC ANNOUNCEMENTS

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



21.1





21.2



21.3



Subject to Articles 20.1, 21.2 and 21.3, the Operator shall be

responsible for the preparation and release of all announcements and

statements regarding this Agreement or the Joint Operations provided

always that no such public announcement or statement shall be issued

or made unless prior thereto all the Parties have been furnished with

a copy thereof and the approval of the Operation Committee has been

obtained.

Except as provided in Article 21.3, if any Party shall itself wish to

issue or make any public announcement or statement regarding this

Agreement or the Joint Operations it shall not do so unless prior

thereto it furnished all the Parties with a copy of such announcement

or statement obtains the approval of the Operating Committee provided

that, notwithstanding any failure to obtain such approval, no Party or

Affiliate of such Party shall be prohibited from issuing or making any

such public announcement or statement if it is necessary to do so in

order to comply with any applicable law or the regulations of a

recognized stock exchange.

The Sole Risk Party carrying out a Sole Risk Project (or the operating

if acting as operator for the Sole Risk Operation on behalf of the

Sole Risk Party) shall be responsible for the preparation and release

of all public announcements and statement to the Sole Risk Operation.

The unanimous approval of the Sole Risk Parties (if more than one)

shall be obtained to the terms of any such announcement or statement

before it is released. If, prior to the release of such announcement

or statement, the Non-Consenting Parties shall have discharged in full

their liabilities to the Sole Risk Party in accordance with Article

14.4, the provisions of Article 21.1 will apply.

ARTICLE XXII - OUTGOINGS AND GRANTS

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



22.1



OUTGOINGS

The Parties shall be liable for payments in accordance with their

Participating Interest. The Operator shall pay all such sums for the

Joint Account excepting royalties, petroleum profit taxes and other

taxes and governmental levies. If the Ministry shall require a Party

to deliver Petroleum in place of royalty, the Operator shall, with the

prior consent of each of the Parties, make arrangements with the

Ministry of such delivery.



22.2



GRANTS

Grants received by any of the Parties from any governmental agency or

body in Nigeria or internationally in respect of their respective

expenditures made pursuant to this Agreement will be retained by the

Party receiving the same. The Operator shall supply to any Party

applying for a grant, at the sole cost of the Party requiring the

same, all requisite data and information which such Party may

reasonably require for the purpose.



ARTICLE XXIII - COVENANT, UNDERTAKING, RELATIONSHIP AND TAX

----------------------------------------------------------23.1



COVENANT



AND



UNDERTAKING



Subject to the overriding responsibility of the Operator under Article

6.2.2, each Party hereby covenants and undertakes with the other Party

that it will comply with all the

applicable

provisions

and

requirements of the Act and the OPL and OML establishing the Deep

Zones of the IMA Field and will do all such acts and things within its

control as may be necessary to keep and maintain any OPL and OML

establishing the Deep Zones of the IMA Field in force and effect.

23.2



RELATIONSHIP





23.2.1



The rights, duties, obligations and liability of the Parties

hereunder shall be several and not joint or collective. Each

Party shall be responsible only for its individual obligations

hereunder. It is expressly agreed that it is not the purpose or

intention of this Agreement to create, nor shall the same be

construed as creating,

any mining partnership,

commercial

partnership or other partnership, joint venture, association or

trust, or as authorizing any Party to act as an agent, servant or

employee for any other Party for any purpose whatsoever except as

explicitly set forth in the Joint Venture Agreement and this

Agreement.



23.2.2



Subject to Article 6.2.3 each Party agrees to indemnify each

other's Party, to the extent of its Participating Interest share

for any claim by or liability to (including any cost and expenses

necessarily incurred in respect of such claim or liability) any

person not being a Party hereto, arising from or in connection

with the Joint Operations including, without prejudice to the

generality of the foregoing, any claim or liability based on the

tort of negligence.



23.2.3



The Operator hereby covenants and undertakes that it will perform

such acts, execute such documents, and do all other things as may

be necessary to enable it to perform each and every agreement,

covenant, undertaking, obligation and liability made, undertaken

or assumed under this Agreement and further will not perform (or

omit to perform) any act the performance (or the omission of the

performance) of which would, if the Owner were a Party, render

the Owner in breach of any such agreement covenant, undertaking,

obligation or liability.



23.3



TAX

The Operator shall be responsible for reporting and discharging all

taxes relating to the ownership and operation of the properties

subject to this Agreement and shall satisfy such obligations out of

the Tax Oil.

ARTICLE XXIV - ASSIGNMENT AND ENCUMBRANCES

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



24.1



RESTRICTION

This Agreement and all the provisions hereof shall be binding upon and

enure to the benefit of the Parties hereto and their respective

successors and assigns but neither this Agreement not any of the

rights, interest or obligations hereunder or under OML 112, OPL 237 or

in respect of the IMA Field shall be assigned or pledged by any Party

without the prior written consent of the other Party, which consent



shall not be unreasonably withheld, and the Government, if necessary,

but may be assigned to Affiliates without such consent subject to the

provisions of this Agreement. Further, AMNI hereby consents to a

pledge by Liberty to of its interests in this Joint Operating

Agreement, the Joint Venture and in the Deep Zones of the IMA Field to

financial institutions now or hereafter providing credit to Liberty.



The Parties acknowledge that the interests conveyed to Liberty with

respect to its 10% undivided interest in the Deep Zones is subject to

obtaining all necessary governmental approvals required to consummate

the transactions provided for herein. The Parties agree to obtain such

approvals as promptly as possible. If by December 1, 1998 the

necessary government approvals have not been obtained, then the

Parties shall enter into such amendments to this Agreement and the

Joint Venture Agreement and such other contractual agreements as are

necessary to provide Liberty (or its nominee) with all of the rights

and benefits that were to be provided to Liberty pursuant to this

Agreement and the Agreements executed in connection herewith.

ARTICLE XXV - WITHDRAWAL

-----------------------25.1



RESTRICTION

No Party may withdraw from this Agreement unless it also withdraws

from the Joint Venture Agreement, and in such case in accordance with

the following provisions of this Article.



25.2



WITHDRAWAL

Subject to the provisions of this Article, any Party may withdraw from

this Agreement and the Joint Venture Agreement by giving notice to all

other Parties stating that it wishes to withdraw from the Joint

Venture Agreement and this Agreement and specifying a proposed

effective date of withdrawal which shall be at least sixty (60) Days,

but not more than one hundred eighty (180) Days after the date of such

notice. Such notice shall be unconditional and irrevocable when given.

Within twenty (20) Business Days of receipt of such notice, any of the

other Parties may similarly give notice that it wishes to withdraw

from the Joint Venture Agreement and this Agreement. If all the other

parties give such notice no assignment shall take place, the Parties

shall be deemed to have decided to abandon the Joint Operations and

the Joint Venture Agreement shall be determined on the earliest

possible date. If less than all the other Parties give such notice,

the withdrawing

Parties shall withdraw from the Joint Venture

Agreement and this Agreement and the non-withdrawing parties shall

take the place of the withdrawing parties in accordance with Article

25.3 without compensation whatsoever.



25.3



CONDITIONS

With



respect



to



Article



25.2:



(a)



a withdrawing Party shall assign all of its said interest to the

non-withdrawing Parties and such interest shall (unless otherwise

agreed by such non-withdrawing parties) be allocated to them in

the proportions in which their respective Participating Interest

prior to the effective date of withdrawal (as hereinafter

defined) bear to the total of the same;



(b)



a withdrawing Party shall promptly join in such actions as may be

necessary or desirable to obtain any necessary or desirable to

obtain consent or approval of the Ministry in connection with,







and shall execute and deliver all documents necessary to effect

any such assignment and a withdrawal shall not be effective and

binding upon the Parties until the date upon which the same shall

have been done (the "effective date of withdrawal");

(c)



a withdrawing Party shall promptly join in all actions required

by the other Parties for the maintenance of the Deep Zone of the

IMA Field provided that its participation in such actions shall

not cause it to incur after the date on which notice of

withdrawal shall have been given any financial obligations except

as provided in this Article XXV;



(d)



a withdrawing Party shall pay all fines and penalties which may

be prescribed by the Ministry and all costs and expenses incurred

by the other Parties in connection with such withdrawal;



(e)



a withdrawing Party shall not be allowed to withdraw from the

Joint Venture Agreement and this Agreement if its said interest

is subject to any liens, charges or encumbrances other than rent

and royalty payable under the OML and OPL governing the Deep

Zones of the IMA Field, unless the other Parties are willing to

accept the assignment subject to such additional liens, charges

and encumbrances;



(f)



unless the Party or Parties acquiring its said interest agree to

accept the withdrawing Party's liabilities and obligations, a

withdrawing Party shall remain liable and obligated for its

Participating Interest share of all expenditure accruing to the

Joint Account under any Work Programme and Budget approved by the

Operating Committee and authorized by AFE prior to the date on

which notice of withdrawal is given even if the operations

concerned are to be implemented thereafter provided always that

this sub-paragraph (f) shall not render a withdrawing Party

liable for any amounts which such Party would not have been

obliged to pay had it not withdrawn; and



(g)



a withdrawing Party shall remain liable and obligated for its

Participating Interest share of all net costs and obligations

that in any way relate to the abandonment of Joint Operations or

a Sole Risk Project in which such withdrawing Party participated

if abandonment occurs within five (5) years after the effective

date of withdrawal

and, prior to such

withdrawal,

such

withdrawing Party shall provide the other Parties with such

security therefor as is acceptable to all such other Parties.



(h)



If such withdrawing Party has, at the effective date of the

withdrawal, already provided security for abandonment costs

pursuant to an Abandonment Agreement entered into pursuant to

Article 6.10.3 the adequacy of such security (both in terms of

the proposed withdrawal in question and otherwise) shall be

reviewed by the non-withdrawing Parties. Without prejudice to the

right of the majority in

Participating

Interests of the

non-withdrawing Parties to require the withdrawing Party to

provide additional or substitute security for its said share, if

the said majority of the non-withdrawing Parties determines that

the security in question should not be released, the withdrawing

Party shall not be entitled to any such release and the security

in question (together with such additional security as the

majority in Participating

Interests of the non-withdrawing

Parties shall have required the withdrawing Party to provide)

shall be held as security for such withdrawing Party's said share

until its liability

under this Article

25.3(h) has been

discharged.







ARTICLE XXVI - FORCE MAJEURE

---------------------------26.1 The obligations, so far as and to the extent that the obligations are

affected, of each of the Parties hereunder, other than the obligations to

make payments of money or furnish security, shall be suspended during the

period and to the extent that such Party is rendered unable, wholly or in

part, from carrying out its obligations under this Agreement by 'Force

Majeure' (as hereinafter defined). In such event, such Party shall give

notice of suspension as soon as reasonably possible to the other Parties

stating the date and extent of such suspension and the cause thereof. Any

of the Parties whose obligations have been suspended as aforesaid shall use

all reasonable endeavours to remedy such cause and shall resume the

performance of such obligations as soon as reasonably possible after the

removal of the cause and shall so notify all the other Parties.

26.2 For the purposes of this Agreement, "Force Majeure" shall mean any event

beyond the reasonable control of a Party and which by the exercise of

reasonable efforts, the Party is not able to prevent, and includes, but is

not limited to, such events as governmental restrictions,

strikes,

lockouts, shortages of labor or material, acts of God, insurrection, riots,

wars, fire, storms, hurricanes, floods and the like.

ARTICLE XXVII - NOTICES

----------------------27.1 Except as otherwise specifically provided, all notices authorized or

required between the Parties by any of the provisions of this Agreement

shall be delivered pursuant to Article 15.5 of the Joint Venture Agreement.

ARTICLE XXVIII - DISPUTE RESOLUTIONS PROVISIONS

----------------------------------------------28.1 This Agreement shall be governed by, construed,

accordance with the laws of England.



interpreted and applied in



28.2 Any dispute arising out of and relating to this Agreement and which the

Parties have not settled by themselves, shall finally be decided, to the

exclusion of the courts, by arbitration in accordance with the arbitration

rules of the International Chamber of Commerce. Three arbitrators shall be

appointed, each party appointing one arbitrator, and the two arbitrators

thus appointed choosing the presiding arbitrator. In reaching a decision,

the arbitrators shall be guided by the terms of this Agreement and

international practice in similar agreements.



IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by

their duly authorized officers and representatives as of the day and year first

above written.

SIGNED, SEALED AND

for and on behalf



DELIVERED

of



SIGNED, SEALED AND

for and on behalf



AMNI INTERNATIONAL PETROLEUM

DEVELOPMENT COMPANY LIMITED



LIBERTY

LTD.



By:



By:



/s/ Tunde J. Afolabi

----------------------Name:

TUNDE J. AFOLABI

Designation: Managing Director

Chief Executive Officer





/s/



TECHNICAL



DELIVERED

of

SERVICES



Wade G. Cherwayko

-----------------------Name:

Wade G. Cherwayko

-----------------------Designation: President

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



SCHEDULE "A"

-----------ACCOUNTING PROCEDURE

-------------------This Schedule "A" is attached to and forms part of the Joint Operating Agreement

made between AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED AND

LIBERTY TECHNICAL SERVICES LTD. the 30th day of June, 1998, (the "Agreement").

I



DEFINITIONS AND PURPOSE

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



1.1



Words and phrases defined in Article 1 of the Agreement,

shall have the meaning assigned to them therein.



1.2



The purpose of this Accounting Procedure is to establish equitable methods

and rules for determining and reporting changes and credits applicable to

Joint Operations under this Agreement, to the end that the Operator shall,

subject to the provisions of this Agreement, neither gain nor lose by

reason of the fact that it acts as the Operator.



II



CHARGEABLE COSTS AND EXPENDITURES

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



when used herein,



The Operator shall charge the Joint Account for all reasonable costs and

expenses made in connection with the conduct of Joint Operations (the

Operator shall not charge the Joint Account, and the Parties shall not be

liable, for any unreasonable costs and expenses). Such costs shall include,

but not be limited to:

2.1



CONCESSION PAYMENTS

-------------------All direct costs necessary to acquire and to maintain rights to the Deep

Zones of the IMA Field or to acquire and to maintain such permits as are

required for the Joint Operations.



2.2



LABOUR AND RELATED COSTS

--------------------------Salaries and wages, including bonuses of employees of the Operator who are

directly engaged in the conduct of Joint Operations, whether temporarily or

permanently assigned, irrespective of the location of such employees. The

costs of salaries and wages referred to herein shall include, without

limitation, the costs of employee benefits, customary allowances and

personal expenses incurred under the Operator's allowances and personal

expenses incurred under the Operators' practice and policy, and amount

imposed by applicable Governmental authorities, which are applicable to

such employees. These costs and expenses shall include:

2.2.1



Cost of established plans for employee group life insurance,

hospitalization, pension, retirement, savings and other benefits

plan;



2.2.2



Cost of holidays, vacations, sickness





2.2.3



and



disability



benefits;



Cost of living, housing, and other customary allowances;



2.2.4



Reasonable personal expenses which are

Operator's standard personnel policies;



reimbursable



2.2.5



Obligations imposed by Government authorities;



under the



2.3



2.2.6



Cost of transportation of employees, other than as provided in

paragraph 2.3 below, as required in the conduct of Joint

Operations.



2.2.7



Charges in respect of employees temporarily engaged in Joint

Operations calculated to reflect the actual costs thereto during

the period or period of such engagement.



EMPLOYEE RELOCATION AND RELATED COSTS

----------------------------------------For the purposes of this paragraph 2.3, the following

following respective meanings, namely:



words shall have the



"Relocation Costs" means, with respect to employees of the Operator

----------------relocation costs, Transportation Costs and transfer expenses, in conformity

with the Operator's

established and Customary practices,

including

transportation of such employees'

families and their personnel and

household effects.

"Transportation Costs" for the above purpose shall include the cost of

--------------------freight and passenger service, meals, hotels, and other expenditures

related to the transfer.

2.3.1 Relocation Costs, Transportation Costs and transfer expenses, within

Nigeria, for personnel engaged in Joint Operations.

2.3.2 Relocation Costs and Transportation

employees, including:



Costs with respect to expatriate



(a)



Relocation Costs and Transportation Costs for the

employees

and their

families

transferring

to

Operations;



(b)



Relocation Costs and other related expenses incurred in the final

repatriation or transfer of the Operator's expatriate employees

and families in the case of such employees' retirement or

separation from the company, or

in the case of such

Office.



employees'



Operator's

the Joint



relation to the Operator's



Head





PROVIDED HOWEVER, that:

(a)



Relocation Costs incurred in moving an expatriate employee and

his family beyond his point of origin, established at the time of

his transfer to Nigeria, will not be charged to the Joint

Account; and



(b)



no charge shall be made to the Joint Account with respect to

expenses incurred in the final repatriation or transfer of the

Operators' expatriate employees and families to other areas

outside of the Contract Area.



2.3.3 Relocation Costs and Transportation

Costs with respect to

Nigeria employees on training assignments outside the Contract

Area.

2.3.4 Charges in respect of employees temporarily engaged in Joint

Operations shall be calculated to reflect the actual costs

thereto during the period or periods of such engagement.



2.4



SERVICES PROVIDED BY THIRD PARTIES/MARKET ORIENTATED AFFILIATES

--------------------------------------------------------------------The cost of professional, technical, consultation, utilities and other

services procured from third party sources pursuant to any contract or

other arrangement between such third parties and the Operator for the

purposes of the Joint Operations.



2.5



SERVICES PROVIDED BY THE OPERATOR'S AFFILIATES, NON-OPERATOR OR

---------------------------------------------------------------------NON-OPERATORS AFFILIATES

------------------------The cost of professional, administrative, scientific and technical services

provided or performed by the Non-Operator, or by any Affiliate of the

Operator or Non-Operator for the direct benefit of Joint Operations,

including, but not limited to, services provided by the Producing,

Exploration, Legal, Financial, Purchasing, Insurance, Accounting, and

Computer Services Departments of Non-Operator or such Affiliates.

2.5.1



Costs and charges hereinabove referred to shall include, without

limitation, the costs and charges for specific projects or

studies carried out for the Joint Account by Non-Operators or

Non-Operators' Affiliates.



2.5.2



Charges for providing the above services shall reflect the actual

cost only of providing such services and shall not include any

element of profit.



2.5.3



The charge out rate shall

incidental to the employment

aforesaid services.





2.5.4



2.6



include all costs and expenses

of the personnel utilized for the



The charges for services rendered for purchasing and/or for

coordinating forwarding and expediting shall be chargeable to the

extent that the same have not been fully reimbursed under

provisions of Article 3.1.3 hereof.



DAMAGE AND LOSS TO JOINT PROPERTY

-------------------------------------Subject to the provisions of paragraph 2.6.2 hereunder, all costs or

expenses incurred for the repair or replacement of Joint Property resulting

from damages or losses by fire, flood, storm, theft, accident or any other

cause shall be for the Joint Account.



2.7



2.6.1



The Operator shall furnish the Non-Operators with written notice

of any occurrence of damage or loss incurred which is estimated

to exceed $50,000.00 as soon as practicable after the occurrence

of the event giving rise to the said damage or loss.



2.6.2



Where the loss or damage, referred to in this paragraph 2.6 is

insured against pursuant to this Agreement, any recoveries or

deductibles under the relevant insurance policies shall be for

the Joint Account.

Recoveries or deductibles

relating to

insurance obtained by an individual Party shall be for the sole

account of that Party.



LEGAL EXPENSES

--------------All costs or expenses of handling, investigating,

settling litigation or claims arising our of



asserting defending and

or relating to Joint



Operations or necessary to protect or recover the Assets, including, but

not limited to legal fees, court costs, arbitration costs, cost of

investigation or procuring evidence and amounts paid in settlement or

satisfaction of any such litigation, arbitration or claims in accordance

with the provisions of this Agreement.

2.8



DUTIES AND TAXES

-----------------All duties and taxes, fees and government

nature except as excluded by this Agreement.



2.9



assessment



of every kind and



COSTS OF OFFICES, CAMPS, AND MISCELLANEOUS FACILITIES IN NIGERIA

-----------------------------------------------------------------------Net costs of establishing, maintaining, and operating offices, camps,

warehouses, housing and other facilities serving the Joint Operations. If

such facilities serve other operations in addition to the Joint Operations,

the net cost thereof shall be allocated to the properties and facilities

served on such equitable basis as may be approved by the Operating

Committee pursuant to Article 2.12 of this Agreement.





2.10 OPERATOR'S PARENT COMPANY HEAD OFFICE OVERHEAD

--------------------------------------------------The charge for the Operator's parent company overhead

"Head Office Overhead Charge").

2.10.1



(hereinafter



called



The Head Office Overhead Charge shall cover

professional,

administrative and technical services which include, but are not

limited

to,

production,

exploration,

treasury,

payroll,

communications, personnel, executive administrative management,

central engineering and process engineering services provided by

the Operator's

parent company Head Office or any of its

Affiliates to the extent not chargeable under paragraph 2.5 of

this Schedule "A."



2.10.2



In respect to the Operator's Head Office Overhead Charge, the

Operator shall charge monthly to the Joint Operations an amount

based on one-twelfth (2) of the estimated annual Head Office

Overhead Charge. Adjustments of the Head Office Overhead Charge,

based on actual expenditures, will be made at the end of each

calendar year.



2.10.3



For the purpose of calculating the Head Office Overhead Charges

pursuant to paragraph 2.10.2 hereof,

costs,

charges, and

expenditures relating to royalties, Concession rentals, taxes,

fees and charges paid to any government or taxing authority,

shall be excluded.



2.11 COSTS OF MATERIAL

------------------The costs of materials purchased or furnished by the Operator for use in

Joint Operations as provided under Section 3 of this accounting procedure.

2.12 COST OF THE OPERATOR'S EQUIPMENT AND FACILITIES

----------------------------------------------------The costs of equipment and Facilities owned and furnished by the Operator

or any of its Affiliates shall be charged to the Joint Account at rates

commensurate with the cost of ownership and operation.

2.12.1



The rates



charged



pursuant



to this



paragraph



2.12



shall not



exceed those currently

prevailing for the supply of like

equipment and facilities on comparable terms in the area where

the Joint Operations are being conducted.

2.12.2



The equipment and facilities referred to herein shall exclude

major investment items such as, but not limited, to, drilling

rigs, producing platforms, oil treating facilities, oil and gas

loading and transportation systems, and terminal facilities and

other major facilities, charges for which shall be subject to a

separate agreement.





2.13 OTHER EXPENDITURES AND COSTS

------------------------------Any other expenditures and costs, not covered or dealt within the foregoing

provisions of this Section 2, which are incurred by the Operator in

accordance with the provisions of this Agreement.

III



MATERIALS ADMINISTRATION

------------------------Costs, expenses, credits and other charges in respect of materials and

supplies, equipment, machines, tools and any other goods of a similar

nature acquired, used, consumed or disposed for the purposes of, or in the

course of the conduct of, the Joint Operations shall be for the Joint

Account as set forth in this Section 3.



3.1



MATERIALS ACQUISITION

---------------------Materials purchased by the Operator shall be at Net Cost. "Net Cost" shall

include, but shall not be limited to, the invoice price less trade and cash

discounts actually received, purchase and procurement fees, freight and

forwarding charges, between point of supply and point of shipment, freight

to port of destination, insurance, customs duties, consular fees, excise

and other applicable taxes, other times chargeable against imported

materials and, where applicable, handling and transportation expenses from

point of importation to warehouse or operating site.

3.1.1



Except as otherwise provided in paragraph 3.1.4 and 3.1.5 below,

materials for use in the Joint Operations shall be purchased by

the Operator in arm's length transactions in the open market.



3.1.2



The Operator shall be under no obligation to purchase new, used

or surplus materials from the Non-Operators unless such materials

are of the specification required and have a competitive price.



3.1.3



Where an Affiliate of the Operator has arranged for the purchase,

coordinated the forwarding and expediting effort, a fee equal to

four percent (4%) of the FOB value of the materials will be added

to the cost of the materials purchased.



3.1.4



Whenever any material is not readily obtained at published or

listed prices because of national emergencies, strikes or other

usual causes over which the Operator has no control, the Operator

may charge Joint Account for the required material at the actual

cost incurred by the Operator in providing such material, and in

moving it to the Contract Area.



3.1.5



The Operator may purchase or otherwise acquire materials from an

affiliate on the same terms as set forth in this paragraph 3.1.





3.2 MATERIALS



DISPOSAL



------------------The operator shall have the right to dispose

provided in Article 2.10 of this Agreement.



of



surplus



materials



as



3.2.1



Disposals of surplus material requiring Operating Committee

approval under Article 2.10 of this Agreement shall be effected

in accordance with a disposal and tendering procedure established

for such disposals by the Operator.



3.2.2



Any disposal and tendering procedure established by the Operator

for the purposes of subparagraph 3.2.1 shall:

(i)



provide for disposal in arms length transactions in the open

market; and



(ii) include, for the Parties, a preferential right to purchase

same at a competitive price.

3.2.3

3.3



Proceeds from each sale or other disposal of material

shall be credited to the Joint Account.



hereunder



INVENTORIES

----------At reasonable intervals, inventories shall be taken by the Operator of all

Joint Property. The Operator shall give thirty (30) days written notice of

its intent to take inventory to permit the Non-Operators to be represented

at the taking of such inventory. Failure on the Non-Operators to be

represented after due notice shall bind the Non-Operators to accept the

inventory taken by the Operator as correct.

3.3.1



Reconciliation of the physical inventory with the account of the

Joint Operations shall be made by the Operator and a list of

overages and

shortages

with

relevant

explanation

where

appropriate

shall be furnished to the

Non-Operators,

if

requested. Appropriate inventory and accounting adjustments shall

thereupon be made to the accounts of the Joint Operations.



3.3.2



Wherever there is a sale or change of interest in the Joint

Property, a special inventory of such Joint Property may be

carried out by the Operator, provided the purchaser of such

interest agrees to bear all of the expenses thereof. In such

cases, both the seller and the purchaser shall be entitled to be

represented at such inventory and shall be bound by inventory

whether or not such representation is provided.





SCHEDULE "B"

-----------UNIFORM PROJECT IMPLEMENTATION PROCEDURE

---------------------------------------This Schedule "B" is attached to and forms part of the Joint Operating Agreement

made between AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED AND

LIBERTY TECHNICAL SERVICES LTD. the 30th day of June, 1998 ("the Agreement").

I



DEFINITIONS

----------Words and phrases defined in Article 1 of the Agreement,

shall have the same meanings assigned to them therein.



II



APPLICATION



when used herein,



----------II.1 This Schedule sets out the procedure for initiating projects, tendering for

and implementing contracts and procuring materials and equipment for the

Joint Operations subject to sections 2.2 and 2.4 of this Schedule "B."

II.2 The procedure shall be applicable to all contracts and purchase orders

whose values exceed the respective limits set forth in Article 4.4 of this

Agreement and which, pursuant thereto, require the prior concurrence of the

Operating Committee.

III



PROCEDURE FOR INITIATING PROJECTS

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



3.1



The Operator realizing the need for a project or contract to which this

procedure applies pursuant to section 2 hereinabove, shall introduce it as

part of the proposed work programmes and budget to be developed and

submitted by the Operator,

under this Agreement, to the Operating

Committee.



3.1.1 The Operator shall provide adequate information with

project including, without limitation, the following:

(i)



respect



to the



A clear definition of the necessity and objective of the project;



(ii) Scope of the project; and

(iii) Cost Estimate thereof.



3.1.2



The Chairman of the Operating Committee shall forward or transmit the

project proposal along with all related documentation prepared and

provided by the Operator pursuant to Subsection 3.1.1 hereof to the

Sub-Committee established pursuant to Article 8.7 of the Agreement.

The Sub-Committee shall consider the proposal at its next meeting and,

if acceptable, shall recommend it to the Operating Committee for

approval.



3.1.3



The Operating Committee may, prior to confirming its approval, make

recommendations to the Operator regarding the selection, scope and

timing of the project. Such recommendations shall constitute an

instruction to the Operator who shall, where applicable, modify its

previous submittal as may be required by the said instruction of the

Operating Committee.



3.1.4



The project as approved pursuant to sub-sections 3.1.2 and 3.1.3 shall

form part of the Work Programme and Budget of the Joint Operations.

Such approval shall also constitute authorizations by the Operating

Committee to the Operator to initiate contacts and purchases relevant

to the project proposal.



3.1.5



Projects design and supervision/management shall first be drawn from

available Operator's in-house expertise or that of the Operator's

Affiliated Companies as approved by the Operating Committee under

approved budget.



3.1.6



After



approval



of



the



project/budget,

the



Operating



the



Operator



Committee



with



shall:



(a)



promptly provide

approved AFE's;



copies of all



(b)



prepare a detailed project implementation schedule including,

without

limitation,

detailed

engineering

design,

material/equipment

procurement,

inspection,

transportation,

fabrication/construction,

installation,

testing

and



commissioning; and

(c)



shall present same to the Operating Committee including,

limitation, the following:

(i)



without



project definition;



(ii) project specification;

(iii)flow diagrams;

(iv) projects schedule;

(v)



major equipment specifications; and



(vi) cost estimate of the project.



(d)

IV

4.1



prepare an activity

Committee.



status



report as directed by the



Operating



CONTRACT TENDER PROCEDURE

--------------------------The following tender procedure shall apply to work not directly undertaken

by the Operator itself or by the Operator's Parent Company which have a

cost of $50,000 or less.

4.1.1



The Operator shall maintain a list of approved companies for the

purposes of contracts for the Joint Operations, (the "Approved

Contractors' List"). The Non-Operators shall have the right to

propose companies to be included in the list. Operator shall be

responsible for prequalifying any Contractor to be included in

the Approved Contractors' List.



4.1.2



Contractors included in the Approved Contractors' List shall be

both local and/or overseas companies or entities. They shall also

be registered with the Department of Petroleum Resources of the

Ministry of Petroleum Resources.



4.1.3



When a contract is to be bid, the Operator shall present a list

of proposed bidders to the Operating Committee for concurrence

not less that fifteen (15) working days before issuance of

invitations to bid to prospective contractors. Non-Operators may

propose additional names to be included in the list of proposed

bidders

or the

deletion

of any one

thereof.

Contract

specifications shall be in English and a recognized format used

in the international petroleum industry.



4.1.4



If the Operating Committee has not responded within fifteen (15)

working days following the presentation of the list of proposed

bidders as aforesaid, the Operator's list shall be deemed to have

been approved.



4.2



The Operator shall establish a Bid Committee who shall be responsible for

prequalifying

bidders,

sending out bid invitations,

receiving and

evaluating bids and determining successful bidders to whom contracts shall

be awarded.



4.3



Analyses and recommendations of bids received and opened by the Bid

Committee shall be sent by Operator to the Operating Committee for

concurrence before a contract is executed with the selected contractor. The

Operating Committee shall respond within fifteen (15) working days.

Approval shall be deemed to have been given if the Operating Committee has

not responded within said period.



4.4



Prospective vendors/Contractors for work estimated in excess of $250,000.00

shall submit the commercial summary of their Bids to the Operator not

earlier than 15 minutes before the closure of Bid as specified in the

letter of invitation to Bid, if requested by the Operator.





4.5 In all cases in which an entity affiliated or otherwise related to Operator

is invited to bid, the Operator shall make full disclosure to the Operating

Committee of its relationship, if any, with the company or companies.

4.6



The foregoing procedures may be waived in emergency cases. In such cases

the Operator may negotiate directly with contractors. In respect of work

requiring specialized skill, upon the approval of Liberty, the Operator may

negotiate directly with the Contractors and promptly inform the Operating

Committee of the outcome of such negotiation.



V



GENERAL CONDITIONS OF CONTRACTS

---------------------------------Except as otherwise approved by the Parties,

guidelines and conditions of contract shall apply.



5.1



5.2



the



following



general



PAYMENT OF TERMS

-----------------5.1.1



A minimum of 10% of contract price shall be held as a retention

payment until after the end of a guarantee period agreed with the

contractor which shall vary between six months and twelve months,

depending on the project, with the exception of drilling and

seismic data acquisition, well surveys and other such services. A

contractor may be given the option to provide other guarantee

equivalent to the 10% retention such as Letter of credit or

Performance Bond.



5.1.2



Provision shall be made for appropriate withholding tax as may be

applicable.



LANGUAGE OF CONTRACT

---------------------The language of the contract shall be English.



5.3



LAWS, REGULATIONS, AND PERMITS

--------------------------------5.3.1



The governing law of all agreements shall be the laws of England.



5.3.2



The Regulations shall apply to contractors performing in Nigeria

and, as far as practicable, they shall use indigenous human and

material resources.



5.3.3



All contracts shall include a provision whereby the Contractor

shall hold the Operator harmless and indemnify the Operator from

and against all liabilities, losses, damages and claims resulting

from claims and suits by third parties.





5.4 TERMINATION

----------Each contract shall also provide for early termination upon notice and the

Operator shall use all reasonable endeavours to obtain a termination

provision with minimal penalty.



5.5



LOCATION SUBSIDIARY

-------------------Contracts shall provide, in the case of a foreign contractor, that the

local part of the work, where practicable,

shall be performed by

contractors' local subsidiary.



6



MATERIALS & EQUIPMENT PROCUREMENT PROCEDURE

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



6.1



The Operator may, through own in-house or Parent Company procure

and equipment subject to conditions set forth hereinbelow.



6.2



The provisions of this

contracts/projects.



6.3



In ordering the equipment/materials, the Operator shall obtain from

vendors/manufacturers such rebates/discounts and such warranties/guarantees

that such vendors/manufacturers normally offer, and all rebates, discounts,

guarantees and all other grants and responsibilities shall be for the

benefit of the Joint Operations.



6.4



The Operator shall:



6.5



Section 6 shall not apply to lump sum or



materials

turnkey



6.4.1



by means of established policies and procedures ensure that its

procurement efforts provide the best total value, with proper

consideration of quality, service, price, delivery and operating

costs to the benefit of the Joint Operations;



6.4.2



maintain appropriate records, which shall be kept up to date,

clearly documenting procurement activities;



6.4.3



provide a quarterly listing of excess materials in its stock list

to the Operating Committee; and



6.4.4



check the listings from other operators pursuant to subsection

6.4.2 above, prior to initiating any foreign purchase order.



The Operator shall initiate and maintain policies and practices which

create a competitive environment/climate amongst local and/or overseas

suppliers. Competitive quotation processes shall be employed for all local

procurements

where the estimated

value exceeds the

equivalent of

$150,000.00.





6.5.1



6.5.2



Fabrication, whenever practicable shall be done locally provided

standards are not jeopardized. To this effective, the Joint

Operations recognize and shall accommodate local offers at a

reasonable premium.

Subject to Article 4.1.1, the Operator shall give preference to

Nigerian Indigenous Companies in the award of sub-contracts

provided the companies possess the requisite skill for the

execution of such contracts.

Contracts within the agreed financial limit of the Operator shall

be awarded to only competent Nigerian indigenous contractors.

Where there are no Nigerian Indigenous contractors possessing the

required skill/capability for the execution of such contracts,

the Operator shall notify the Operating Committee accordingly.



6.6



Analyses and recommendations of competitive quotations received pursuant to

section 6.5 shall be presented to the Operating Committee for approval

before a purchase order is issued to the selected vendor/manufacturer.



6.6.1



Approval shall be deemed to have been given if a response has not

been received within fifteen (15) working days of receiving the

analyses and recommendation presented pursuant to above section

6.6.



VII



PROJECT MONITORING

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



7.1



The Operator

Committee.

7.1.1



shall



furnish



monthly,



a project



report to the



Operating



For major contracts exceeding $1,000,000.00, or equivalent, the

Operator shall, in addition, furnish to Operating Committee a

detailed quarterly report which shall include:

(i)



Approved budget total for each project;



(ii) Expenditure on each project;

(iii) Variances and explanation;

(iv) Number and value of construction change orders;

(v)



Bar chart of schedule showing work in

already

completed

and schedule of

significant events; and



progress and work

mile-stones,

and



(vi) Summary of progress during the reporting period, summary of

existing problems, if any, and proposed remedial action; and

anticipated problems; and percentage of completion.



7.1.2



7.1.3



In case of an increase in excess of 10% on the project, the

Operator shall promptly notify and obtain the consent of the

Operating Committee.

Not later that three (3) months following the physical completion

of any major projects over $1,000,000.00, or equivalent, the

Operator shall prepare and deliver to the Operating Committee a

project completion report which shall include the following:

(a)



Cost performance of the project in accordance with the work

breakdown at the commencement of the project;



(b)



Significant variations in any item or subitems; and



(c)



Summary of problems and unexpected events encountered during

the project.





SCHEDULE "C"

-----------UNIFORM NOMINATION, SHIP SCHEDULING AND LIFTING PROCEDURE

--------------------------------------------------------[The terms of this Schedule shall be negotiated by the Parties promptly after

the discover of a Commercial Quantities of Petroleum, with all Parties

negotiating in good faith]



SCHEDULE "D"

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



MAP OF THE IMA FIELD

-------------------[MAP OF THE IMA FIELD]



IMA FIELD, OML 112 (FORMERLY OPL 469) ) AND OPL 237

- ------------------------------------------------------------DEEP



ZONES:



All geological formations within and around the Ima Field that are north

(upthrown) and south (downthrown) of the geological fault dividing the Ima

Field, all depths below the geological producing reservoir within the Ima Field,

known as the * F + sand, as currently shown on the maps and schematic

cross-section materials covering the Ima Field annexed hereto as Schedule A, or

a depth of 12,150 feet (true vertical depth), whichever is the lesser depth,

lying within the geological co-ordinates along the northern boundary of OML 112

and OPL 237, to the south boundary of OML 112, to the western boundary of OML

112 and to the eastern boundary of 550,000m E, as annexed hereto as Schedule B.



SCHEDULE "E"

-----------AFE FOR IMA # 11

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







EX-10.5

10



Exhibit



10.5

DEBENTURE

Dated as of June 30,1998

BETWEEN

LIBERTY TECHNICAL SERVICES LTD.

as the Chargor

AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED

as the Beneficiary





THIS DEBENTURE

LIBERTY

Bahamas



is



dated



as



of



TECHNICAL SERVICES LTD.,

"LIBERTY@, also referred



June



30,



1998



and



is



made



BETWEEN:



a company existing under the laws of the

to as the "CHARGOR@); and



AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED, a company existing

under the laws of Nigeria ("AMNI", also referred to as the "BENEFICIARY").

PREAMBLE



WHEREAS Liberty has entered into a Sale/Purchase Agreement and related

Prepayment Agreement, with Total International Limited ("TOTAL") both dated July

29, 1997 (the "LIBERTY OIL CONTRACT" and the "PREPAYMENT AGREEMENT"

respectively), and

WHEREAS pursuant to the Prepayment Agreement, Total made a Prepayment (as

defined in the Prepayment Agreement) to Liberty in the amount of US.$35,000,000

(the APREPAYMENT@) of which approximately US[$2,916,666.67] has been reimbursed

to Total to date; and

WHEREAS Liberty requested Total to a limited extension of the period for

the reimbursement of the Prepayment (as defined in the Prepayment Agreement) as

described in Clause A of the amendment ("AMENDMENT NO. 1") of the Prepayment

Agreement dated 6 April 1998; and

WHEREAS it was a condition of Total entering into Amendment No 1 that the

Chargor enter into a Debenture dated 6th April 1998 for the purpose of securing

the payment and performance of the Liberty's Secured Liabilities as defined in

such Debenture;

WHEREAS Amni is the holder of OML No. 112 issued by the Federal Government

of Nigeria in respect of Concession Block 469 and an OPL also issued by the

Federal Government of Nigeria in respect of Concession Block 237, and Amni and

Liberty are Joint Venturers in the development and operation of the part of the

Concessions in Nigeria by virtue of which Liberty is the beneficial owner of 10%

interest in the Deep Zone in OML No 112 (as such term is hereinafter defined);

WHEREAS Liberty and Amni have pursuant to a Memorandum of Agreement of even

date herewith agreed (inter alia) that Amni will accept joint responsibility for

$5,000,000 of the debt currently owed by Liberty to Total under the Prepayment

Agreement as amended and that Liberty would grant Amni a charge over certain

assets owned by Liberty, currently charged to Total.

WHEREAS the respective rights of Total and

Intercreditor Agreement of even date herewith



Amni



are



set



out in an



WHEREAS it is intended by the parties to this Debenture that this document

shall take effect as a deed notwithstanding the fact that a party may only

execute this document under hand.

IT



IS



AGREED



as



follows:





1

INTERPRETATION

1.1



DEFINITIONS

In



this



Debenture:



"AFFILIATES" means Abacan Resource Corporation, Dahomey Resource Corporation,

West African Resource Corporation, Abacan Resources (Benin) Limited, Abacan

Resources (Delta) Limited, Abacan Technical Services Ltd., Abacan Services (UK)

Limited, Abacan Services (USA) Limited, Abacan Resources (Nigeria) Ltd., Agbara

Resources Limited, Angus International Resources Ltd., Profile International

Ltd. and includes all other legal entities controlled directly or indirectly by

any of such companies.

"ASSUMPTION OF DEBT" means the acceptance by Amni of joint responsibility with

Liberty for up to $5,000,000 of the Secured Liabilities, which obligations may

be reduced to $2,500,000 of the Secured Liabilities if the first well drilled

fails to discover Economic Production [WHERE AECONOMIC PRODUCTION@ MEANS THAT

SUCH WELL IS CAPABLE OF PRODUCING CONTINUOUSLY AN AMOUNT OF PRODUCTION AT A

MINIMUM LEVEL WHICH WOULD ENTITLE LIBERTY TO RECEIVE AN ENTITLEMENT TO OIL



HAVING



AN



ANNUAL



"ENFORCEMENT

(Appointment



VALUE



OF



OFFICER" means

of Enforcement



NOT



---]



the person

Officer).



defined



as



such



in



Clause



7.1



"EVENT OF DEFAULT" means Beneficiary has made a required payment with respect to

its obligations as to the Assumption of Debt and Chargor has failed to reimburse

Beneficiary for the amount of such payment within thirty (30) days after the

date the payment is made. For the purposes of this definition, Chargor shall be

deemed to have timely reimbursed Beneficiary if Beneficiary makes the payments

to Secured Lenders by using proceeds attributable to Chargor's interest in the

Security Assets.

"FINANCE DOCUMENTS" means that certain Credit Facility Agreement by and among

Chargor and certain of its Affiliates, as Borrowers and Guarantors, and Total

and Credit Suisse First Boston ('CSFB") (Total and CSFB are collectively

referred to here as the "Secured Lenders).

"PROJECT" means the development and operation of the Deep Zone capable of

producing continuously an amount of production at a minimum level that would

entitle Liberty to receive an entitlement to oil having an annual value of not

less than U.S. $5,000,000 (at then current oil prices) as determined by a

reputable firm of independent petroleum engineers.

"REALISATIONS ACCOUNT" means each amount maintained from time to time by the

Chargor for the purposes of Clause 6.2 (Contingencies) at such bank as the

Beneficiary may from time to time approve.

"SECURED LIABILITIES" means the Chargor's liability to the Beneficiary hereunder

in respect of the Assumption of Debt.

"SECURITY ASSETS" means all assets, rights and property of the Chargor the

subject of any security created by or pursuant to this Debenture and described

in the Schedule,



"SECURITY PERIOD" means the period beginning on the date of this Debenture and

ending on the date on which (a) all the Secured Liabilities have been

unconditionally and irrevocably -paid and discharged in full and no further

Secured Liabilities can arise under or in respect of the Finance Documents; or

(b) the Beneficiary's obligation as to the Assumption of Debt is unconditionally

and irrevocably released and discharged.

"TSRA" means the Termination Settlement

parties of even date herewith

1.2



2

2.1



and



Release



Agreement between the



CONSTRUCTION

(a)



Capitalised terms defined in the TSRA and the Finance Documents have,

unless expressly defined in this Debenture, the same meaning in this

Debenture.



(b)



If the Beneficiary (based upon appropriate legal advice in relevant

jurisdictions) considers that any amount paid by the Chargor to the

Beneficiary is capable of being avoided or otherwise set aside on the

liquidation or administration of the Chargor or otherwise, then that

amount shall not be considered to have been irrevocably paid for the

purposes of this Debenture until such time as the period during which

such payment may be set aside has expired.



COVENANT

COVENANT



TO



PAY



In consideration of the Assumption of Debt the Chargor covenants with

Beneficiary that the Chargor will reimburse Beneficiary for payments made to

Secured Lenders with respect to the Assumption of Debt, which reimbursement

take the form of proceeds out of Chargor=s interest in n production from

Security Assets.

3



FIXED



3.1



AND



CREATION



FLOATING

OF



the

the

may

the



CHARGES



FIXED



CHARGES



As security for the Assumption of Debt the Chargor charges in favor of the

Beneficiary by way of a fixed charge all of their present and future right,

title and interest in and to the assets and interests described in the Schedule.

4



CONTINUING



4.1



SECURITY,



CONTINUING



ETC



SECURITY



The security constituted by this Debenture shall be continuing and until the

Assumption of Debt: is terminated or discharged will extend to the ultimate

balance of all sums payable by the Chargor under the Finance Documents,

regardless of any intermediate payment or discharge in whole or in part.



4.2



BREAKING



OF



ACCOUNTS



If for any reason the security constituted by this Debenture ceases to be a

continuing security, the Beneficiary may open a new account with or continue any

existing account with the Chargor and the liability of the Chargor in respect of

the Secured Liabilities and the Assumption of Debt at the date of such cessation

shall remain regardless of any payments in or out of any such account.

4.3



5



REINSTATEMENT

(a)



Where any discharge (whether in respect of the obligations of the

Chargor or any other person or any security for those obligations or

otherwise) is made in whole or in part, or any arrangement is made on

the faith of any payment, security or other disposition, which is

avoided or must be restored on insolvency, liquidation or otherwise

without limitation, the liability of the Chargor under this Debenture

shall continue as if such discharge or arrangement had not occurred.



(b)



The Beneficiary may concede or compromise any claim that any payment,

security or other disposition is liable to avoidance or restoration.



WHEN



SECURITY



BECOMES



ENFORCEABLE



The security constituted by this Debenture shall only become immediately

enforceable upon the occurrence of an Event of Default and the power of sale and

other powers conferred by the Conveyancing and Law of Property Act 1881 of

Nigeria as varied or amended by this Debenture shall be immediately exerciseable

upon and at any time after the occurrence of any Event of Default provide the

same is continuing. After the security by this Debenture has become enforceable,

the Beneficiary may in its absolute discretion enforce all or any part of the

security in any manner it sees fit

6

6.1



ENFORCEMENT



OF



SECURITY



GENERAL



For the purposes of all powers implied by statute the Secured Liabilities shall

be deemed to have become due and payable on the date of this Debenture and

Section 20 of the Conveyancing and Law of Property Act 1881 of Nigeria

(restricting the power of sale) and Section 17 of the same Act (restricting the



right



of



6.2



consolidation)



shall



not



apply



to



this



security.



CONTINGENCIES

(a)





(b)



If the Beneficiary enforces the security constituted by this Debenture

(whether by the appointment of an Enforcement Officer Or otherwise) at

a time when no amounts are due under the Finance Documents (but at a

time when amounts may become so due), the Beneficiary (or the

Enforcement Officer) may pay the proceeds of any recoveries effected

by it into any Realisations Accounts as it considers appropriate.



The Beneficiary (or the Enforcement Officer) may (subject to the

payment of any claims having priority to this security) withdraw

amounts standing to the credit of the Realisations Accounts to:

(i)



meet all costs, charges and expenses incurred and payments made

by the Beneficiary (or such Enforcement Officer) in the course of

such enforcement;



(ii) pay remuneration to the Enforcement

becomes due and payable; and



Officer



(iii)meet amounts due and payable under the Finance

when they become due and payable,



as and



when



it



Documents as and



in each case, together with interest thereon (before as well as after

judgment and payable on demand) at the Default Rate from the date they

become due and payable until the date they are unconditionally and

irrevocably paid and discharged in full.

(c)



7



ENFORCEMENT



7.1



OFFICER



APPOINTMENT



OF



ENFORCEMENT



OFFICER



(a)



At any time after the security constituted by this Debenture becomes

enforceable or (if the Chargor so requests the Beneficiary in writing)

at any time, the Beneficiary may without further notice, appoint,

under seal or in writing under its hand, any one or more qualified

persons to be a receiver or receiver and manager (each an AENFORCEMENT

OFFICER@) of all or any part of the Security Assets in like manner in

every respect as if the Beneficiary had become entitled to exercise

all of the rights,

powers and

discretions

conferred by the

Conveyancing and Law of Property Act 1881 of Nigeria.



(b)



In paragraph (a) above "qualified person" means a person who, under

the Companies and Allied Matters Decree 1990 of Nigeria, is qualified

to act as a receiver/manager of the property of any company with

respect to which he is appointed.



7.2

The



The Chargor will not be entitled to withdraw all or any moneys

(including interest) standing to the credit of any Realisations

Accounts until the expiry of the Security Period.



REMOVAL

Beneficiary



may



by



writing



under



its



hand:



(a)



remove any Enforcement Officer appointed by it; and



(b)



may, whenever it deems it expedient, appoint a new Enforcement Officer

in the place of any Enforcement Officer whose appointment may for any

reason have terminated.





7.3



REMUNERATION



The Beneficiary may fix the remuneration of any Enforcement Officer appointed by

it provided that such remuneration shall be reasonable having regard to the

circumstances.

7.4



RELATIONSHIP



WITH



BENEFICIARY



To the fullest extent permitted by law, any fight, power or discretion conferred

by this Debenture (either expressly or impliedly) upon an Enforcement Officer

may be exercised by the Beneficiary in relation to any Security Assets without

first appointing an Enforcement Officer or notwithstanding the appointment of an

Enforcement Officer.

8



POWERS



8.1



OF



ENFORCEMENT



OFFICER



GENERAL

(a)



Each Enforcement Officer has, and is entitled to exercise, all of the

rights, powers and discretions set out below in this Clause 8 in

addition to those conferred by the Conveyancing and Law of Property

Act 1881 of Nigeria on any receiver appointed thereunder and those

conferred by the Companies and Allied Matters Decree 1990 of Nigeria

on an administrative receiver appointed thereunder.



(b)



If there is more than one Enforcement Officer holding office at the

same time, each

Enforcement

Officer may (unless the document

appointing him states otherwise) exercise all of the powers conferred

on an Enforcement Officer under this Debenture individually and to the

exclusion of any other Enforcement Officer.



8.2



POSSESSION



An Enforcement Officer may take immediate possession at get in and collect any

Security Assets.

8.3



SALE



OF



ASSETS



An Enforcement Officer may sell, exchange, convert into money and realise

Security Assets by public auction or private contract and generally in

manner and on any terms which he reasonably thinks proper. The consideration

any such transaction may consist of cash or other valuable consideration and

such consideration may be payable on such terms as he thinks fit.

8.4



any

any

for

any



COMPROMISE



An Enforcement Officer may settle, adjust, refer to arbitration, compromise and

arrange any claims and disputes with or by any person who is or claims to be a

creditor of the Chargor or relating in anyway to any Security Assets.



8.5



LEGAL



ACTIONS



An Enforcement Officer may bring, prosecute, enforce, defend and abandon all

actions, suits and proceedings in relation to any Security Assets which may seem

to him to be expedient.

8.6



RECEIPTS



An Enforcement Officer may give valid receipts for all moneys and execute all

assurances and things which may be proper or desirable for realising any

Security Assets.



8.7



SUBSIDIARIES



An Enforcement Officer may form a subsidiary company of the Chargor and transfer

to that subsidiary any Security Assets.

8.8

An



OTHER



POWERS



Enforcement



Officer



may:



(a)



do all other acts and things which he may reasonably consider

desirable or necessary for realising any Security Assets or incidental

or conducive to any of the rights, powers or discretions conferred on

an Enforcement Officer under or by virtue of this Debenture; and



(b)



exercise in relation to any

Security

Assets all the powers,

authorities and things which he would be capable of exercising if he

were the absolute beneficial owner with full title guarantee of the

same, and may use the names of the Chargor for any of the above

purposes.



9



APPLICATION



All moneys

enforcement



OF



PROCEEDS



received by the Beneficiary and the Enforcement Officer pursuant to

of this security shall be applied:



FIRST

in satisfaction of or provision for all costs, charges and

expenses incurred and payments made by the Beneficiary or an Enforcement Officer

in the enforcement of the security and of all remuneration due to the

Beneficiary or an Enforcement Officer;

SECOND

in or towards payment of all other fees and interest due to Total by

Amni as a result of the Assumption of Debt

.

THIRD

in or towards payment of all other amounts due to the Beneficiary

under this Debenture.

FOURTH

10



in

NO





(a)



payment



LIABILITY



to

AS



the



Chargor.



MORTGAGEE



IN



POSSESSION



ETC.



The Beneficiary shall riot, nor shall any Enforcement

Officer

appointed as aforesaid by reason of it or the Enforcement Officer

entering into possession of the Security Assets, or any part of them,

be liable to account as mortgagee in possession or be liable for any

loss on realisation or for any default or omission for which a

mortgagee in possession might be liable.



(b)



Every Enforcement Officer shall be deemed to be the agent of the

Chargor for all purposes and shall as agent for all purposes be deemed

to be in the same position as an Enforcement Officer duly appointed by

a mortgagee under the Conveyancing and Law of Property Act 1881

Nigeria. The Chargor alone shall be responsible for its contracts,

engagements, acts, omissions, defaults and losses and for liabilities

incurred by it and the Beneficiary shall not incur any liability

(either to the Chargor or to any other person) by reason of the

Beneficiary's making his appointment as an Enforcement Officer.



(c)



Every such Enforcement Officer and the Beneficiary shall be entitled

to all the rights, powers, privileges and immunities conferred on

mortgagees and Enforcement Officers by the Conveyancing and Law of

Property Act 1981 of Nigeria when such Enforcement Officers have been

duly appointed under that Act but so that Section 20 of that Act shall

not apply.



(d)



11



The Beneficiary. and the Enforcement Officer shall be entitled to

exercise its powers under this Assignment in such a manner and at such

times as the Beneficiary and the Enforcement Officer in its absolute

discretion may determine and the Beneficiary and the Enforcement

Officer shall not in any circumstances be answerable for any loss

occasioned by the same or resulting from postponement thereof (unless

caused by its negligence or willful default).



PROTECTION



OF



THIRD



PARTIES



No purchases, mortgagee or other person or company dealing with the Beneficiary

or an Enforcement Officer or its or his agents shall be concerned to enquire

whether the Secured Liabilities have become payable or whether any power which

the Beneficiary or Enforcement Officer is purporting to exercise has become

exerciseable or whether any money remains due under the Finance Documents or to

see to the application of any money paid to the Beneficiary or to any

Enforcement Officer.

12

12.1



EXPENSES

UNDERTAKING



TO



PAY





Upon the occurrence and during the continuation of an Event of Default all

costs, charges and expenses properly incurred and all payments made by the

Beneficiary, any Enforcement Officer or other person appointed under this

Debenture in the lawful exercise of the powers conferred by this Debenture

whether or not occasioned by any act, neglect or default of the Chargor shall

carry interest (before as well as after judgment) at the Default Rate from the

date of it being incurred or becoming payable until the date it is

unconditionally and irrevocably paid and discharged in full. The amount of all

such costs, charges, expenses and payments and all interest thereon and all

remuneration payable under this Debenture shall be payable by the Chargor on

demand. All such costs, charges, expenses and payments shall be paid and charged

as between the Beneficiary and the Chargor on the basis of a fall indemnity and

not on the basis of party and party or any other kind of taxation.

12.2



INDEMNITY



The Beneficiary and every Enforcement Officer, attorney, manager or other person

appointed by the Beneficiary under this Debenture shall, be entitled to be

indemnified out of the Security Assets in respect of all. liabilities and

expenses properly incurred by them in the execution or attempted execution of

any of the powers, authorities or discretions vested in them by this Debenture

and against all actions, proceedings, costs, claims and demands in respect of

any matter or thing properly done or omitted in any way relating to the Security

Assets and the Beneficiary and any Enforcement Officer may retain and pay all

sums in respect of the same out of any moneys received under the powers

conferred by this Debenture.

13



DELEGATION



BY



BENEFICIARY



The Beneficiary and any Enforcement Officer may at any time and from time to

time delegate by power of attorney or in any other manner to any person or

persons all or any of the powers, authorities and discretions which are for the

time being exercisable by the Beneficiary or an Enforcement Officer (as

appropriate) under this Debenture in relation to the Security Assets or any part

of them. Any such delegation may be made upon such terms (including power to

sub-delegate) and subject to such regulations as the Beneficiary or the

Enforcement Officer (as appropriate) may think fit Neither the Beneficiary nor

any Enforcement Officer shall be in any way liable or responsible to the Chargor

for any loss or damage arising from any act, default, omission or misconduct on

the part of any such delegate or sub-delegate.



14



ASSURANCES



The Chargor shall

Beneficiary or an



15



at its own expense take whatever reasonable action the

Enforcement Officer may require for:



(a)



perfecting or protecting the security

Debenture over any Security Assets; or



(b)



facilitating the realisation of any Security Assets or the exercise of

any right, power, authority or discretion vested in the Beneficiary or

any Enforcement Officer of the Security Assets or any of its or their

delegates or sub-delegates.



REDEMPTION



OF



PRIOR



intended to be created by this



MORTGAGES



The Beneficiary may, at any time after the security constituted by this

Debenture has become enforceable, redeem any prior Security Interest other than

the pledge made to the Secured Lenders against the Security Assets or procure

the transfer of any such Security Interest to itself and may settle and pass the

accounts of the prior mortgagee, chargee or encumbrancer. Any accounts so

settled and passed shall be conclusive and binding on the Chargor, All.

principal moneys, interest, costs, charges and expenses of and incidental to any

redemption and transfer shall be paid by the Chargor to the Beneficiary on

demand.



16

POWER

16.1



OF



ATTORNEY



APPOINTMENT



The Chargor, by way of security, irrevocably appoints the Beneficiary and every

Enforcement Officer of the Security Assets appointed by the Debenture and. their

delegates and sub-delegates to be its attorney and take any action which the

Chargor is obliged to take under this Debenture (including, without limitation,

to make any demand upon or to give any notice or receipt to any person owing

moneys to the Chargor and to execute and deliver any charges, legal mortgages,

assignments or other security and any transfers of securities) and generally in

their name and on their behalf to exercise all or any of the rights, powers,

authorities and discretions conferred by or pursuant to this Debenture or by

statute on the Beneficiary or any Enforcement Officer, delegate or sub-delegate

and(without prejudice to the generality of the foregoing) to seal and deliver

and otherwise perfect any deed, assurance, agreement, instrument or act which it

or he may reasonably deem proper in or for the purpose of exercising any of the

powers, authorities and discretions. Such powers shall only be exercisable in

the circumstances contemplated by Clause 6.

16.2



RATIFICATION



The Chargor hereby ratifies and confirms and agrees to ratify and confirm

whatever any attorney as is mentioned in Clause 16.1 (Appointment) does or

purports to do in the exercise or purported exercise of all or any of the

powers, authorities and discretions referred to in this Clause 16.

17



NEW



ACCOUNTS



If the Beneficiary receives or is deemed to be affected by notice whether actual

or constructive of any subsequent charge or other interest affecting any part of

the Security Assets and/or the proceeds of sale any Security Assets, other than

the pledge made to the Secured Lenders the Beneficiary may open a new account or

accounts with the Chargor. If the Beneficiary does not open a new account it

shall nevertheless be treated as if it had done so at the time when it received

or was deemed to have received notice. As from that time all payments made to

the Beneficiary shall be credited or be treated as having been credited to the

new account and shall not operate to reduce the amount for which this Debenture



is



security.



18



STAMP



DUTIES



The Chargor shall. pay and, forthwith on demand, indemnify the Beneficiary

against any liability it incurs in respect of any stamp, registration and

similar tax which is or becomes payable in connection with the entry into,

performance or enforcement of this Debenture.

19



WAIVERS,

(a)



REMEDIES



CUMULATIVE



The rights of the Beneficiary under this Debenture:

(i)



may be exercised as often as necessary;



(ii) are cumulative and not exclusive of its rights under general law;

and



(iii) may be waived only in writing and specifically.

Delay



in exercising or non-exercise of any right is not a waiver of that right.

(b)



20



The Beneficiary may waive any breach by the Chargor of any of the

Chargor's obligations under this Debenture if so instructed by the

Beneficiary.



MISCELLANEOUS



20.1



SEVERABILITY



If a provision of this Debenture is or becomes illegal or unenforceable in any

jurisdiction, that shall not affect:

(a)



the validity or enforceability

provision of this Debenture; or



(b)



the validity or enforce ability in other

other provision of this Debenture.



20.2



in that



jurisdiction



of any other



jurisdictions of that or any



COUNTERPARTS



This Debenture may be executed in any number of counterparts and this will have

the same effect as if the signatures on. the counterparts were on a single copy

of this Debenture.

20.3



NOTICES



Any notice or other communication given or made under this Agreement shall be in

writing and may be delivered personally or sent by telex or facsimile

transmission or by recorded delivery letter addressed as follows:

(a)



If



to



the



Chargor,



to:



LIBERTY TECHNICAL SERVICES

Suite 140

14811 St. Mary's Lane

Houston, Texas 77079

USA

Attn.



Tim



LIMITED



Stephens



LIBERTY TECHNICAL SERVICES

39 Warehouse Road, Apapa,

Lagos, Nigeria



LIMITED





Attention: Wade G. Cherwayko

Telex No. 2915 Abacan Ny

Facsimile transmission No:

(b)



If



to



the



Beneficiary,



234



1



5454



03



01



to:



AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LTD.

Savage Street

Victoria Island, P.O. Box 54452

Falomo, Ikoyi

Fax: 011 234 262 1526

Attn: Tunde J. Afolabi

Managing Director

or to such other

relevant addressee

Any



such



notice

(i)



address or telex

may hereafter by

shall



be



deemed



to



PLOT



1377b



Tiamiyu



or facsimile transmission number as the

notice hereunder substitute.

have



been duly served, given or made:



in the case of delivery, when left at the relevant address; or



(ii) in the case of telex, when the sender receives the answer-back of

the addressee at the end to the telex message, or

(iii)in the case of a facsimile transmission, on

addressee of the complete text in legible form.

21



COVENANT



TO



receipt



by the



RELEASE



The Beneficiary shall, at the request and cost of the Chargor, take any action

necessary (including re-assigning to the Chargor) to release or reassign the

Security Assets from the security constituted by this Debenture upon the expiry

of the Security Period.

22

This

law.



GOVERNING



LAW



Debenture



shall



23



JURISDICTION



23.1



SUBMISSION



be governed by and construed in accordance with Nigerian



For the benefit of each party to this Debenture, each party to this Debenture

agrees that the courts of Nigeria have non-exclusive jurisdiction to settle any

disputes in connection with this Debenture and accordingly submit to the

jurisdiction of the Nigerian courts.



23.2

SERVICE



OF



PROCESS



Without prejudice to any other mode of service, service of process relating to

any proceedings in connection with this Debenture shall be made upon the Chargor

at the address set forth in Article 20.3 hereof.

23.3

The



FORUM



CONVENIENCE



AND



ENFORCEMENT



ABROAD



Chargor:

(a)



waives objection to the Nigerian courts on grounds of inconvenient

forum or otherwise as regards proceedings in connection with this



Debenture; and

(b)



23.4



agrees that a judgment or order of a Nigerian court in connection with

this Debenture is conclusive and binding on it and may be enforced

against them in the courts of any jurisdiction.



NON-EXCLUSIVITY



Nothing in this Clause 23 (Jurisdiction) limits the right of the Beneficiary to

bring proceedings against the Chargor in connection with this Debenture in any

other court of competent jurisdiction or concurrently in more than one

jurisdiction.



SCHEDULE

ASSETS AND INTERESTS



THE DEEP ZONE OF NIGERIA

MINING LEASE OML 112



IN WITNESS whereof this Debenture has been duly executed as a deed on the date

stated at the beginning of this deed.

SIGNED



and



SEALED



for and an behalf of

LIBERTY TECHNICAL SERVICES

By:



[Seal]

LIMITED



/s/ Wade Cherwayko

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



Name:



Wade Cherwako

-------------------Title:

Director

SIGNED and SEALED

for and on behalf



of



AMNI INTERNATIONAL PETROLEUM

DEVELOPMENT COMPANY LIMITED

By:

-------------------Name:

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



[Seal]



Title:



Vice



President











EX-10.6

11





EXHIBIT



10.6

CONSENT AGREEMENT

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



On even date herewith Amni International Petroleum Development Company Limited

(AAmni@) and Liberty Technical Services Ltd. (ALiberty@) have entered into a

Joint Venture Agreement regarding the Deep Zones of the IMA Field. All

capitalised terms used but not defined herein shall have the meanings ascribed

to such terms in the Joint Venture Agreement (AJoint Venture Agreement@).

Liberty has requested the consent of Amni to a pledge by Liberty of its interest

in the Joint Venture Agreement, the Joint Operating Agreement and the other

agreements executed in connection therewith (collectively, the AJoint Venture

Interests@) to Credit Suisse First Boston. The pledge shall be accomplished

pursuant to the form of the Debenture attached hereto. Such pledge is being

made in accordance with the terms of a Credit Facility Agreement being executed

on even date herewith by Liberty, Abacan Resource Corporation, and certain other

subsidiaries of Abacan Resource Corporation, as borrowers and guarantors, and

Credit Suisse First Boston.

Amni hereby consents to the granting of a pledge on the Joint Venture Interests

pursuant to the terms of the Debenture.

Liberty



Technical



By:



/s/ Tunde Folawiyo

-------------------Tunde Folawiyo

--------------Secretary

---------



Name:

Title:



Amni



International



By:

Name:

Title:



Services



Ltd.



Petroleum



Development







Limited



/s/ Tunde Afolabi

------------------Tunde J. Afolabi

-----------------Managing Director/CEO

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



[The Debenture referenced herein

10-KSB dated effective March 1,





Company



has been filed as Exhibit 10.5 to the Form

1999.]







EX-10.7

12



EXHIBIT



10.7



DATED 30th June 1998



(1) ABACAN TECHNICAL SERVICES LIMITED

(2) LIBERTY TECHNICAL SERVICES LIMITED

(3) AMNI INTERNATIONAL PETROLEUM

DEVELOPMENT COMPANY LIMITED

(4) SEDCO FOREX INTERNATIONAL, INC.

(5) SCHLUMBERGER OVERSEAS S.A.



AGREEMENT

FOR THE ACQUISITION OF CERTAIN INTERESTS IN PROCESS

AND OTHER EQUIPMENT, FIXTURES AND FITTINGS ATTACHED TO, OR

CONNECTED WITH, A MOBILE OFFSHORE PRODUCTION UNIT ("THE LANGLEY")



Gouldens

22 Tudor Street

London EC4Y OJJ

Tel: 0171 583 7777

Facsimile: 0171 583 3051



CONTENTS

CLAUSES



Page No.



1.



Interpretation:



-1-



2.



Transfer:



-2-



3.



Debts:



-2-



4.



Completion:



-3-



5.



Warranties:



-4-



6.



Taxation etc:



-5-



7.



General:



-5-



8.



Waiver of Claims



-6-



9.



Jurisdiction:



-6-



SCHEDULE 1EQUIPMENT



-7-



SCHEDULE 2BILL OF SALE



-8-



SCHEDULE 3PERMITTED SECURITY INTERESTS



-9-



SCHEDULE 4NOTICE



WBS(8)

THIS



-10-



738914

AGREEMENT



is



made



this



30th



day



of



June



1998



BETWEEN:

(1)



ABACAN TECHNICAL SERVICES LIMITED, a company incorporated under the laws of

the Bahamas ("Abacan");



(2)



LIBERTY TECHNICAL SERVICES LIMITED,

of the Bahamas ("Liberty");



(3)



AMNI INTERNATIONAL

PETROLEUM DEVELOPMENT COMPANY

incorporated under the laws of Nigeria ("Amni");



(4)



SEDCO FOREX INTERNATIONAL,

Panama ("Sedco"); and



(5)



SCHLUMBERGER OVERSEAS S.A., a company incorporated under the laws of Panama

("Schlumberger").



a company



incorporated under the laws

LIMITED,



a



company



INC., a company incorporated under the laws of



WHEREAS:

1.



Pursuant to an Integrated Services Contract dated 20 October 1995 Sedco and

Schlumberger have provided to Liberty and Amni the use of a Mobile Offshore

Production Unit ("the Langley") and of certain process and other equipment

attached or fixed thereto, and provide certain continuing services in

connection therewith.



2.



The parties have agreed that any interests of Liberty and Amni in the

foregoing equipment shall be transferred to Sedco on the following terms

and conditions.



NOW



IT



1.



Interpretation:



IS



HEREBY



AGREED



as



follows:



In this Agreement, unless the context otherwise

expressions have the following meanings:

"Completion"



requires,



the following



has the meaning given by Clause 4;

-1-





"Equipment"



means all

fittings

(without

turbines)



process equipment and any other equipment, fixtures and

attached to, or connected with, the MOPU, including

limitation) the power plant (comprising three gas

and that equipment specified in Schedule 1 hereto;



"ISA"



means the Integrated Services Contract dated 20 October 1995

between Liberty, Amni, Sedco and Schlumberger (as amended by a

Deed of Amendment of even date herewith);



"MOPU"



means the Mobile Offshore Production Unit (the ALangley");



"Schlumberger

Group"



means Schlumberger and any holding company of Schlumberger and

any subsidiary of Schlumberger or of any such holding company

(and in this Agreement "subsidiary" and "holding company" shall

have the meanings given them by the Companies Act 1985);



"US$"

means

2.



the



currency



of



the



United



States



of



America.



Transfer:



2.1

Liberty and Amni hereby confirm that Amni has waived in favour of

Liberty all right, title and interest that it may have in the Equipment as part

of a settlement between the parties, which settlement is evidenced in a separate

agreement of even date herewith.

2.2

Liberty agrees to transfer to Sedco, and Abacan agrees to procure the

transfer to Sedco of, any right, title and interest that Liberty may have in the

Equipment free from all liens, charges and encumbrances at and with effect from

(other than the Permitted Lien as hereinafter defined).

2.3

For the avoidance of doubt, it is hereby confirmed and acknowledged by

Liberty that full payment for the process equipment referred to in Clause 7.2.1

of the ISA has not been received by Sedco and Schlumberger; and that accordingly

the Bill of Sale referred to in such Clause has not been delivered to Liberty

and that, notwithstanding any payments that may have been made to Sedco and

Schlumberger, title and ownership of such equipment has not been transferred to

it.

2.4

The parties agree that the right, title and

pursuant to this Clause 2 shall be valued at US$ [

3.



interest transferred

].



Debts:



3.1

In consideration

Schlumberger agree that



for

the



the transfer referred to in Clause 2, Sedco and

debts comprising:

-2-





(a)



the sum of US$[

] owed to them by Abacan as at 18

June 1998 in respect of the Trident 8 Drilling Contract dated 1

November 1996 between Sedco and Abacan (as amended);



(b)



the sum of US$[

at 18 June 1998 under the ISA;



]



owed to them by Liberty and Amni as



(c)



the sum of US$ [

] owed to them under Clause 14.1.3.2(d)

of the ISA in respect of the termination of the ISA;



(d)



subject to and without

prejudice

to Clause 3.2, the sum of

approximately

US$[

]

owed to them under Clause

14.1.3.2 (b) of the ISA in respect of the demobilisation expenses; and



(e)



any other amounts owed to members of the Schlumberger Group as at 26

June 1998 by Abacan, Liberty and Amni or any of their subsidiaries or

holding companies,



shall be extinguished and cease to be payable.



3.2

Amni acknowledges and agrees that, following the termination of the ISA,

and notwithstanding Clause 8 hereof, Amni shall be liable to pay, and shall pay,

demobilisation expenses to Sedco and Schlumberger (including under Clause

14.1.3.2) up to a maximum amount of US$750,000, provided that Amni shall not be

required to make such payment if the MOPU and the Equipment shall have been

chartered under contract to a third party on terms that such charter contract

commences immediately upon the termination of the ISA (or at the latest within

15 days of the date of such termination).

4.



Completion:



4.1

The transfer contemplated by this Agreement shall be completed

immediately upon execution of this Agreement (time being of the essence). At

such completion ("Completion") Liberty and Amni will deliver to Sedco:

(a)



a Bill of Sale in the form set out in Schedule 2 executed by Liberty;



(b)



a Deed of Amendment amending the terms of the ISA in the form agreed

between the parties executed by Liberty and Amni;



(c)



a notice in the form set out in Schedule 4 executed by Amni; and



(d)



confirmation that they have made payment to Sedco by wire transfer of

the sum of US$252,600 in respect of the period from 19 June 1998 to 30

June 1998 (both days inclusive) for services rendered pursuant to ISA.

-3-





5.

Warranties:

5.1



Liberty, Abacan and Amni represent and warrant to Sedco and Schlumberger as

follows:

(a)



Liberty, Abacan and Amni have the requisite

enter into and perform this Agreement.



(b)



This Agreement constitutes and any other documents which are to be

delivered at Completion will, when executed, constitute binding

obligations of such of Liberty, Abacan and Amni as are parties to them

in accordance with their respective terms.



(c)



The execution and delivery of this Agreement, and the performance by

Liberty, Abacan and Amni of their obligations under it, will not:

(i)



result in a breach of any provision

constitution of Liberty, Abacan or Amni;



power and



of



the



authority to



documents



of



(ii) result in a breach of, or constitute a default under, any

instrument to which Liberty, Abacan and Amni are parties or by

which they are bound; or

(iii)result in a breach of any order, judgment or decree of any court

or governmental agency to which Liberty, Abacan or Amni are

parties or by which they are bound.

(d)



All consents and agreement of third parties which are required for the

transfer contemplated by this Agreement have been obtained in writing.



(e)



Other than the Permitted Lien (as hereinafter defined), no third party

(other than Sedco or Schlumberger) has any right, title or interest in

or to the Equipment.



(f)



Neither Liberty, Abacan, nor Amni has any right, title or interest in

or to the MOPU nor, to the best of their knowledge and belief, does



any third party other than the Permitted Lien.

(g)



Other than the Permitted Lien or as set out in Schedule 3 hereto, no

option, right to acquire, mortgage, charge, pledge, lien (other than a

lien arising by operation of law in the ordinary course of trading) or

other form of security or encumbrance or equity on, over or affecting

the whole or any part of the Equipment is outstanding and there is no

agreement or commitment to give or create any and no claim has been

made by any person to be entitled to any.



(h)



Neither Liberty nor Amni has agreed to acquire any asset comprised in

the Equipment on terms that the property is not passed until full

payment is made.

-4-





(i)



Following the transfer of the Equipment at Completion, Liberty and

Amni will have no further right, title or interest in or to the

Equipment.



For the purposes of this Clause 5.1, "Permitted Lien" means any charge or

security interest in favour of Credit Suisse First Boston or Total International

Limited.

5.2



Liberty, Abacan and Amni accept that Sedco and Schlumberger are entering

into this Agreement in reliance upon each of the warranties set out above.



6.



Taxation etc:



6.1



Sedco shall be responsible for any VAT or customs duties arising from the

transfer of the Equipment hereunder.



7.



General:



7.1



Liberty, Abacan and Amni shall from time to time and at all times after

Completion execute all such deeds and documents and do all such things as

Sedco or

Schlumberger

may

reasonably

require for perfecting the

transactions intended to be effected under or pursuant to this Agreement

and for vesting in Sedco the full title and benefit of the Equipment.

Without limiting the foregoing, Liberty and Amni agree to execute all such

documents and do all such things as may be necessary to vest in Sedco the

benefit of manufacturer's and supplier's warranties in respect of the

Equipment of which they may have the benefit.



7.2



Liberty and Amni

undertake to preserve and transfer to Sedco all

documentation relating to government duties, taxation and customs levies

that may be relevant to or relate to the Equipment.



7.3



This Agreement constitutes the entire agreement between the parties

relating to the sale and purchase of the Equipment and no party has relied

on any representation made by any other party or any other person except as

expressly set out herein.



7.4



The parties agree that the contents of this Agreement, and all details of

the transactions contemplated in it, shall be kept strictly confidential

and shall not be disclosed to any other person.



7.5



This Agreement may be executed in

be effective until each party has

counterpart shall constitute an

counterparts shall constitute one



7.6



The obligations of Liberty,

several and not joint.



any number of counterparts, but shall not

executed at least one counterpart. Each

original of this Agreement, but all the

and the same instrument.



Abacan and Amni under



this



Agreement



are



8.



Waiver of Claims



-5

8.1 Schlumberger and Sedco hereby waive and release (on behalf of themselves

and the Schlumberger Group) all claims against and indebtedness due from

Liberty, Abacan, Abacan Resource Corporation and all of its subsidiaries

and affiliates arising under the terms of the ISA or in respect of or in

connection with operations related thereto. Schlumberger and Sedco hereby

waive and release all claims against and indebtedness due from Amni arising

under the terms of the ISA arising on or before 30 June 1998, or in respect

of or in connection with operations related thereto and arising on or

before 30 June 1998. Schlumberger and Sedco accept that Amni, Liberty and

Abacan are entering into this Agreement in reliance upon the foregoing

waiver.

9.



Jurisdiction:



9.1



This Agreement shall be governed by and construed in accordance with

English law. All disputes or claims arising in connection with this

Agreement

shall be settled under the Rules of Arbitration of the

International Chamber of Commerce by three arbitrators appointed in

accordance with such rules.



AS WITNESS the hands of the duly authorized representatives of the parties the

day and year first above written.

-6

SCHEDULE 1

EQUIPMENT



See



attached



document

-7-





SCHEDULE 2

BILL OF SALE



Know



all



men



by



these



presents,



that:



LIBERTY TECHNICAL SERVICES LIMITED, a company incorporated under the laws of the

Bahamas (hereinafter called the ASeller"), does hereby bargain and sell all its

right, title and interest in all process equipment and other equipment, fixtures

and fittings attached to, or connected with, the Mobile Offshore Production Unit

(the ALangley"), including, without limitation, the power plant (comprising

three gas turbines) and that equipment specified in Schedule 1 hereto

(hereinafter called the AEquipment") unto:

SEDCO FOREX INTERNATIONAL, INC., a company incorporated

laws of Panama, its successors and assigns ("Sedco")

for



a



consideration



valued



at



under



the



US$8,000,000.



FURTHER, that the Seller hereby warrants that no third party (other than Sedco

or Schlumberger Overseas S.A.) has any right, title or interest in or to the

Equipment and that title to the Equipment is free and clear of all liens,

charges, claims, mortgages or encumbrances (and there is no agreement or

commitment to give any).



NO

BY



WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE IS GIVEN

THE SELLER.



In testimony whereof, the Seller has executed this Bill

authorized representative this 30th day of June 1998.

LIBERTY



TECHNICAL



SERVICES



of



Sale by its



LIMITED



- ------------------------------------Signature

Name:

Title:

-8

SCHEDULE 3

PERMITTED SECURITY INTERESTS



None



-9

SCHEDULE 4

NOTICE



Amni International Petroleum Development Company Limited hereby gives six (6)

months' notice to Sedco Forex International, Inc. ("Sedco") and Schlumberger

Overseas S.A. ("Schlumberger") that the Integrated Services Contract dated 20

October 1995 (as amended by a Deed of Amendment dated 30 June 1998) ("ISA")

shall be terminated on 30 December 1998 pursuant to Article 14.1.1 thereof In

connection therewith, it acknowledges that such termination is for reasons other

than the material breach or default of Sedco or Schlumberger.



Authorized signatory for and

behalf of Amni International

Development Company Limited



on

Petroleum

30 June



1998



-10

SIGNED



by



T.B.



Folawiyo



for and on behalf of ABACAN

TECHNICAL SERVICES LIMITED

in the presence of:

J. Harvie

SIGNED



by



T.B.



Folawiyo



)

)

)

)

)

)

)

)

)

)



/s/



T.B.



Folawiyo



for and on behalf of LIBERTY

TECHNICAL SERVICES

LIMITED in the presence of:

J. Harvie



)

)

)

)



/s/



T.B.



SIGNED



)

)

)

)

)

)

)

)



/s/



Tunde



FOREX



)

)

)

)

)

)

)



/s/



Didier



SCHLUMBERGER



)

)

)

)

)

)

)



/s/



Michael



by



for and on behalf of AMNI

INTERNATIONAL PETROLEUM

DEVELOPMENT COMPANY

LIMITED in the presence of:

Musa Bello Mustapha

SIGNED



by



Didier



for and on behalf

INTERNATIONAL, INC.

presence of:

name unrecognizable

SIGNED



by



Michael



Fontaine

of

in



SEDCO

the



McGuiny



for and on behalf of

OVERSEAS S.A. in the

presence of:

name unrecognizable



Folawiyo



-11







EX-10.8

13





EXHIBIT



10.08



ABACAN RESOURCE CORPORATION

and

DAHOMEY RESOURCE CORPORATION

and

LIBERTY TECHNICAL SERVICES LIMITED

(as the Borrowers)

THE GUARANTORS herein referred to



Afolabi



Fontaine



McGuiny



CREDIT SUISSE FIRST BOSTON

(as Agent)

CREDIT SUISSE FIRST BOSTON

(as Security Trustee)

and

THE LENDERS herein referred to

$30,702,500

CREDIT FACILITY AGREEMENT



FACILITY AGREEMENT (the "AGREEMENT") made on 2 July 1998

BETWEEN

ABACAN RESOURCE CORPORATION, an Alberta, Canada corporation, whose registered

office is at Suite 1600, 407 Second Street S.W., Calgary, Alberta, Canada

(sometimes referred to individually herein as "ARC") and DAHOMEY RESOURCE

CORPORATION, a Bahamas limited company, whose registered office is at Chambers,

Suite 304, Beaumont House, Bay Street, P.O. Box CB 11986, Nassau, The Bahamas

(sometimes referred to individually herein as "DAHOMEY"), and LIBERTY TECHNICAL

SERVICES LIMITED, a Bahamas limited company, whose registered office is at

Chambers, Suite 304, Beaumont House, Bay Street, P.O. Box CB 11986, Nassau, The

Bahamas (sometimes referred to individually herein as "LIBERTY") (in their

capacities as borrowers and guarantors together the BORROWERS and each a

BORROWER);

EACH OF THE COMPANIES LISTED IN SCHEDULE 6 HERETO, (together the ORIGINAL

GUARANTORS and each an ORIGINAL GUARANTOR),

CREDIT



SUISSE



FIRST



BOSTON



(as



AGENT);



CREDIT



SUISSE



FIRST



BOSTON



(as



SECURITY



THE

IT



LENDERS

IS



listed



on



the



execution



TRUSTEE);



pages



of



this



Agreement.



AGREED

------



DEFINITIONS



AND



INTERPRETATION



1.1

DEFINITIONS:

requires:



In



this



Agreement,



except



where



the context otherwise



ADVANCE means the principal amount of the Dollar amount made available to

the Borrowers hereunder by way of loan or (as the context requires) the

principal amount thereof for the time being outstanding;

ADDITIONAL GUARANTOR means any Subsidiary which shall accede to this

Agreement pursuant to clause 12.2(j), in each case, so long as it remains an

Additional Guarantor;

AGENT'S SPOT RATE OF EXCHANGE means the spot rate of exchange of the Agent

for the purchase with one currency of any other relevant currency in the London

foreign exchange market at or about 10.00 a.m. (London time) on the day in

question for delivery two Business Days later, the Agent's certificate as to

such rate being conclusive in the absence of manifest error;



- 1

AMNI GUARANTEE means the agreement executed or to be executed in favour of

the Security Trustee and issued by Amni International Petroleum Development

Company Limited pursuant to clause 4.1(i);

APPLICABLE LAWS means, in relation to any member of the Consolidated Group, all

and any laws, statutes, regulations and judgments relating to its business as in

force from time to time;

AVAILABILITY PERIOD means the period

Agreement and ending seven (7) days

BORROWER

together



means each of

the BORROWERS;



ARC,



commencing on the Closing Date of this

thereafter;



Dahomey and Liberty and as the context requires



BORROWERS' AGENT means ARC or any other person for the time being nominated as

such by the then current Borrowers' Agent and agreed by the Agent (such

agreement not to be unreasonably withheld or delayed);

BUSINESS DAY means a day on which banks are open in New York, London, and Z rich

for the transaction of business of the nature required by this Agreement and in

relation to a day on which a payment is to be made, in the place of the

principal domestic market of the currency of such payment;

CLOSING DATE means the date that the Agent has given to the Lenders and the

Borrowers' Agent the notice referred to in clause 4.2;

COMMITMENT means, in relation to a Lender, the aggregate principal amount set

opposite its name in Schedule 1 or as applicable, the amount set out in a

Transfer Certificate for a Lender duly completed and accepted for transfer

pursuant to the terms of this Agreement, in any case to the extent not

transferred, canceled or reduced in accordance with the provisions hereof;

CONSOLIDATED

Guarantors;



GROUP



means



at



any



particular



date



the



Borrowers



and



the



DEBENTURES mean the agreements executed or to be executed by each of the

Obligors pursuant to clause 4.1(f) and 12.2(k) in favour of the Security

Trustee creating a first ranking Security Interest over the assets and

undertakings required to be covered by the Security Trustee in accordance with

the terms hereof;

DOLLARS



AND



$



means



the



lawful



currency



of



the United States of America;



DRAWING DATE means a Business Day upon which the Advance is to be made as set

forth in the Drawing Notice relating thereto or is made on or before July 2,

1998;

DRAWING NOTICE means a notice of drawing substantially in the form set out in

Schedule 2 duly completed and signed by the Borrowers and the Borrowers' Agent;

- 2

ENVIRONMENT

(i)



means:



any land including, without limitation, surface land and sub-surface

strata, sea bed or river bed under any water (as defined in paragraph

(ii) below) and any natural or man-made structures;



(ii) water including, without limitation, coastal and inland waters,

surface waters, ground waters and water in drains and sewers; and



(iii)air including, without limitation, air within buildings and other

natural or man-made structures above or below ground;

ENVIRONMENTAL CLAIM means any claim from any third party, governmental authority

or agency or any regulatory body, notice of violation, prosecution, demand,

action, abatement or other order, relating to Environmental Matters and any

notification or order requiring compliance with the terms of any Environmental

Licence or Environmental Law;

ENVIRONMENTAL LAW includes, in relation to any member of the Consolidated Group,

all or any laws, statutes, regulations, treaties, and judgments of any

governmental authority or agency or any regulatory body in any jurisdiction in

which that member of the Consolidated Group is formed or carries on business

relating to Environmental Matters applicable to it and/or any other activities

from time to time carried on by it and/or the occupation or use of any property

owned, leased or occupied by it as in force from time to time;

ENVIRONMENTAL LICENCE means, in relation to any member of the Consolidated

Group, any permit, licence, authorisation, consent or other approval required at

any time by any Environmental Law for the business from time to time carried on

by it as in force from time to time;

ENVIRONMENTAL MATTERS means (i) any release or threatened release, generation,

deposit, disposal, keeping, treatment, transportation, transmission, handling or

manufacture of any waste or any Substance; (ii) nuisance, noise, defective

premises, health and safety at work or elsewhere; and (iii) the pollution,

conservation or protection of the Environment or of man or of any living

organisms supported by the Environment;

EVENT OF DEFAULT means any of the events mentioned in clause 13.1 upon the

expiration of any applicable cure or grace period set forth therein;

FACILITY means the advance facility the terms and conditions of which are set

out in this Agreement;

FACILITY



MARGIN



means



4.0



percent



per



annum.



- 3

FACILITY OFFICE means, in relation to any Lender, the office listed in Schedule

1, or such replacement office as any Lender nominates in accordance with the

terms of this Agreement;

FINAL MATURITY DATE in respect of the Total Outstandings in the amount of

$20,702,500 plus all capitalised interest hereunder means the date falling 364

calendar days after the date of this Agreement (unless extended as set forth in

this definition) or if such day is not a Business Day the immediately preceding

Business Day. At any time after the date falling ten months after this Agreement

the Borrowers' Agent, by giving the Agent not less than thirty Business Days nor

more than 60 days notice thereof, may request the Lenders to extend the Final

Maturity Date by 180 days or less (the FIRST EXTENSION DATE) commencing on the

date of such request to the Agent. If the Final Maturity Date is so extended,

the Borrowers' Agent may request further extensions of the Final Maturity Date

of up to 180 days each by giving notice to the Agent thereof not less than

thirty Business Days nor more than 60 days following the expiration of each

three-month interval following the First Extension Date and during the

then-current Availability Period. No extension of the Final Maturity Date shall

be binding unless and until notified in writing to the Borrowers' Agent by the

Agent, and shall not be binding on any Lender unless accepted by such Lender, in

its sole discretion, by written notice thereof to the Agent. The Obligors

acknowledge that any extension of the Final Maturity Date may be conditioned

upon the acceptance by the Obligors of certain financial covenants then required

by the Lenders;



FINAL MATURITY DATE in respect of the Total Outstandings in excess of the amount

of $20,702,500 plus all capitalised interest hereunder means the date falling

544 days after the Closing Date or such earlier date as may be agreed between

the Agent and the Borrowers' Agent;

FINANCING DOCUMENTS means this Agreement, the Share Pledges, the Security Trust

Deed, the Guarantor Accession Deeds, the Debentures, the Amni Guarantee, the

Warrant and any other agreement or document executed pursuant to this Agreement

which is expressed therein to be a Financing Document;

GUARANTOR means each of the Borrowers, any of the Original Guarantors and any

Additional Guarantor as shall accede to this Agreement pursuant to clause

12.2(j) in each case, so long as they remain Guarantors and as the context

requires, together the Guarantors;

GUARANTOR ACCESSION DEED means in respect of an Additional Guarantor a deed

substantially in the form set out in Schedule 5 with such amendments as the

Agent may approve or reasonably require duly executed on behalf of the proposed

Additional Guarantor, the Borrowers' Agent and the Agent;

INTELLECTUAL PROPERTY means all letters patent, trade marks, service marks,

designs, utility models, copyrights, design rights, applications for

registration of any of the foregoing and rights to apply for them in any part of

the world, moral rights, inventions, confidential information, know-how and

rights of like nature arising or subsisting anywhere in the world in relation to

any of the foregoing, whether registered or unregistered and the benefit of all

licences and other rights to use any of the same now or hereafter owned by or

otherwise belonging to any Obligor;

- 4

INTEREST ADJUSTMENT means the amount of interest plus Facility Margin equal to

the difference between the interest and Margin calculated in accordance with

clause 6.2 (a) and (b) less the interest and Facility Margin which would have

been payable hereunder if the Total Outstandings hereunder were $20,702,500.

INTEREST

Period;



PAYMENT



DATE



means,



for



any



Advance,



the last day of an Interest



INTEREST PERIOD means, for any Advance, the period determined in accordance with

clause 6.1;

JOINT VENTURE DOCUMENTS means the Joint Venture Agreement dated November 27,

1996 between Optimum Petroleum Development Limited and Agbara Resources Limited

(Nigerian Oil Prospecting License 310); the Purchase and Sale Agreement between

Addax Petroleum Benin Limited and Abacan Resources (Benin) Ltd. dated July 21,

1997; Contrat pour l'Exploration et l'Exploitation P troli res, Bloc Offshore

Profond No. 4 dated February 1, 1997 between Addax Petroleum Benin, Abacan

Resource Limited (Benin), and the Government of Benin; Contrat pour

l'Exploration et l'Exploitation P troli res, Bloc Offshore No. 1 et SEME dated

February 2, 1997 between Addax Petroleum Benin, Abacan Resource Limited (Benin),

and the Government of Benin; and Joint Venture Agreement dated March 8, 1998

(Nigerian Oil Prospecting License (OPL) 309) between Liberty Technical Services

Limited and Yinka Folawiyo Petroleum Company Limited; and the Joint Venture

Agreement dated June 30, 1998 between Liberty Technical Services Limited and

Amni International Petroleum Development Company Limited, in each case as

amended, modified, extended or renewed;

LENDERS means those of the banks listed in Schedule 1 and their respective

successors and any permitted transferees or assigns which are for the time being

participating in the Facility;

LICENCES means, in relation to any member of the Consolidated Group, any public

law permits for the carrying out of its business together with any other public

law or administrative law consents, concessions, licences or public law permits

required for the carrying out of any such business (including planning consents



and



licences);



MAJORITY LENDERS means Lenders whose Outstandings then aggregate more than 66.66

per cent. of the Total Outstandings;

MATERIAL ADVERSE EFFECT has the meaning asc

ribed thereto in clause 11.1 (c);

MATERIAL ENVIRONMENT CLAIM means any Environmental Claim which would, if

adversely decided, entitle any person to shut down or suspend all or any

material part of the business of any member of the Consolidated Group, or result

in any cost, claim, liability, expense or damages in excess of $1,000,000 to be

suffered or incurred by any member of the Consolidated Group or otherwise have a

Material Adverse Effect upon the business, properties, results of operations or

financial condition of any member of the Consolidated Group;

- 5

MOPU AGREEMENT means the agreement executed or to be executed pursuant to Clause

4.1(i) between Sedco Forex, Inc. and the Security Trustee in respect of the

Mobile Offshore Production Unit referred to therein in substantially the form of

Schedule 7;

OBLIGOR means the Borrowers and the Guarantors or as the context requires any of

them;

OIL AND

produced



GAS means any and all liquid and gaseous hydrocarbons and each of them

and to be produced from the Oil Properties;



OIL AND GAS DEVELOPMENT AGREEMENT means any agreement (other than a Joint

Venture Document) now or hereafter entered into between any of the Borrowers or

Guarantors or any Subsidiary of any of them pursuant to the terms of which such

person directly or indirectly participates with any other person in any capital

investment or joint ownership or profit sharing arrangement in respect of any

Oil or Gas Property or any related pipeline or other transport facility or

equipment, power generating plant, Oil and Gas Sale agreement, or power sale

agreement and such agreement may reasonably be expected to have a material

benefit for or impose any material obligation upon such Borrower or Guarantor or

Subsidiary;

OIL AND GAS PARTNER means each party (other than an Obligor) which is a party to

any Joint Venture Agreement or Oil and Gas Development Agreement;

OIL AND GAS PROPERTIES means each of the concessions, operating licenses, oil

mining leases and other interests referred to in any of the Joint Venture

Documents or Oil and Gas Development Agreements and any other concession,

operating license, oil mining license, or similar agreement or interest in which

any Obligor or Subsidiary of any Obligor has direct or indirect interest or

participation and which interest could reasonably be expected to have a material

benefit to such Person;

OUTSTANDINGS means, in relation to a Lender, its aggregate participation in the

Advance then outstanding;

PERMISSIONS means, in relation to any member of the Consolidated Group, any

consents, concessions, contractual licences or permits required for the carrying

out of any of its business;

PERMITTED PURPOSE means any purpose for which the proceeds of the Advance may be

used in accordance with and subject to the terms of this Agreement;

PERMITTED

(a)



SECURITY



INTEREST



means:



a lien or right of set-off arising in the normal course of trading or by

operation of law securing obligations not more than thirty days overdue and



liens for taxes not yet due and payable;

(b)



any conditional sale or title retention arising under or pursuant to any

contract for the purchase or leasing of goods in the normal course of

trading;



- 6

(c) the Security Interests existing as at the date of this Agreement details of

which have been disclosed in writing to the Agent;

(d)



Security Interests incurred or deposits made in the ordinary course of

trading to secure the performance of tenders, statutory obligations, bids,

leases,

government

contracts,

performance

bonds, fee and expense

arrangements with trustees and fiscal agents and other similar obligations

(exclusive of obligations incurred in connection with Borrowings);



(e)



any Security Interest created or permitted to subsist with the prior

written consent of the Majority

Lenders,

such consent not to be

unreasonably withheld in circumstances where in the opinion of the Majority

Lenders the interests of the Lenders are reasonably protected after taking

into account the reasonable requirements of the Obligors to develop their

assets,;



(f)



any Security Interest over any asset acquired by any member of the

Consolidated Group, if such acquisition is not prohibited pursuant to the

terms hereof, as security for any Borrowings which are incurred solely to

finance all or part of the acquisition cost of that asset;



(g)



any Security Interest securing Borrowings incurred to refinance other

Borrowings permitted to be secured pursuant to any of the paragraphs (a) to

(f) above provided that the replacement Security Interest does not cover

any assets other than the original assets subject to the original Security

Interest and that the aggregate principal amount secured thereby is not

increased;



(h)



any Security Interest created after the date hereof (other than Security

Interests permitted under paragraphs (a) to (g) above) and securing

indebtedness in aggregate for the Consolidated Group not exceeding $250,000

(or its equivalent at the Agent's Spot Rate of Exchange); and



(i)



any Security Interest now or hereafter created in favour of the Security

Trustee under or subject to the Security Trust Deed;



(j)



any Security Interest granted for the benefit of Amni International

Petroleum Development Company Limited in the interest acquired pursuant to

a Joint Venture Agreement with Liberty dated June 30, 1998 with the written

consent of the Agent securing the reimbursement obligations of Liberty to

Amni International Petroleum Development Company Limited in respect of

amount paid by Amni International Petroleum Development Company Limited to

the Security Trustee under the Amni Guarantee;



(k)



any Security Interest in respect of taxes payable by any Obligor in respect

of its interest in OPL 237 and OML 112 (other than in respect of the Deep

Rights as defined in the Joint Venture Agreement referred to in paragraph

(j) above); and



- 7

(l) any Security Interest in favour of the Security

Financing Document.



Trustee created under any



POTENTIAL EVENT OF DEFAULT means any event which with the giving of notice,

lapse of time or making of any determination specified in clause 13.1 may

constitute (after the expiration of any applicable grace or cure period set



forth



therein)



an



Event



of



Default;



REFERENCE BANKS means, subject to clause 6.6, the principal London office of

each of The Chase Manhattan Bank, ABN Amro Bank N.V., and Credit Suisse First

Boston, and any replacement Lender nominated under that clause;

SECURITY INTEREST means any mortgage, charge, pledge, lien, right of set-off,

assignment by way of security, retention of title or any security interest

whatsoever or any other agreement or arrangement having the effect of conferring

security, howsoever created or arising;

SECURITY TRUST DEED means the security trust deed dated of even date herewith

between the Borrowers, the Guarantors, Credit Suisse First Boston as Agent,

Credit Suisse First Boston as Security Trustee and others as the same may be

amended from time to time;

SHARE PLEDGES means the pledges executed or to be executed by the Borrowers and

Guarantors pursuant to clause 4.1(f) in favour of the Security Trustee creating

a first ranking Security Interest over the common stock of each of the Borrowers

(other than ARC) and each Guarantor;

SUBSTANCE means (i) any radioactive emissions, (ii) electricity and any

electrical or electromagnetic emissions and (iii) any substance whatsoever,

(including but not limited to any "hazardous substances" under the Comprehensive

Environmental Response, Compensation and Liability Act of 1990 of the United

States of America, sections 964 - 965 and whether in solid or liquid form or in

the form of a gas or vapour, and whether alone or in combination with any other

substance) which is generally considered or known to be harmful to man or any

other living organism supported by the Environment or damaging to the

Environment or public health or welfare;

TAX means any present or future tax, impost, duty, levy or charge of a similar

nature payable to or imposed by any supra-national, governmental, federal,

state, provincial, local governmental or municipal taxing authority, body or

official (together with any related penalties, fines, surcharges and interest);

TIL



means



Total



International



Limited,



a



Bermuda



limited



company;



TOTAL COMMITMENTS means at any time the aggregate amount of all the Commitments

in respect of all the Lenders;

TOTAL OUTSTANDINGS means at any time the aggregate amount of all Outstandings in

respect of all the Lenders;

- 8

TRANSFER

pursuant



CERTIFICATE means

to clause 19.1;



a



TRANSFEREE has the meaning

WARRANT means an agreement

entered into in accordance

1.2

FINANCIAL DEFINITIONS:

otherwise requires:



certificate in the form of Schedule 4 delivered

ascribed thereto in clause 19.1; and

in the form of Schedule 8 entered into or to be

with clause 4.1(l).

In



this



Agreement



except



where



the context



ACCOUNTS means the Reference Accounts and any other audited or unaudited

accounts of the Borrowers whether or not consolidated, delivered or required to

be delivered by the Borrowers to the Agent in accordance with this Agreement;

but so that if the Reference Accounts and other Accounts prepared in respect of

the same period are in conflict in any way, the Reference Accounts shall

prevail;

ACCOUNTING PRINCIPLES means the accounting principles, standards, conventions

and practices complying with generally accepted accounting principles in the



United States of America which are generally adopted and practised by companies

in the United States of America or otherwise with the prior written consent of

the Agent;

BORROWINGS



means



and



includes



as



at



any



date:



(a)



all moneys borrowed (with or without security) or raised by way of debt

finance by the Borrowers or any other member of the Consolidated Group;



(b)



receivables sold, assigned or discounted (save to the extent that the same

are sold, assigned or discounted without recourse);



(c)



the acquisition cost

time of acquisition

advance or deferred

finance or financing



(d)



any obligation under any lease which is required to be

Accounting Principles;



(e)



the net exposure

on termination

any derivative

financial effect



(f)



the principal amount raised by the Borrowers or any other member of the

Consolidated Group by acceptances (not being acceptances in relation to the

purchase of goods or services in the ordinary course of trading which have

been outstanding for 180 days or less) or under any acceptance credit

opened on its behalf by a bank or accepting house;



of any asset to the extent payable before or after the

and possession by the party liable therefor where the

payment is arranged primarily as a method of raising

the acquisition of that asset;

capitalised



under



(meaning the amount payable by the party liable thereunder

or closing out determined on a marked to market basis) of

transactions entered into which have the commercial or

of any Borrowing set out within this definition;



- 9

(g) the principal amount (including any fixed or minimum premium payable on

final redemption or repayment) of any notes, bonds, debentures, loan stock

or other

securities of the Borrowers or any other member of the

Consolidated Group; and

(h)



any guarantee, indemnity or similar assurance against the Borrowings of any

person;



but



excluding:



(i)



any Borrowings by the Borrowers or any other member of the Consolidated

Group which would otherwise be taken into account and are intended to be

applied in the repayment of the whole or part of any other moneys taken

into account as Borrowings pending such application provided that they are

so applied within three months of their being so borrowed; or



(k)



amounts which would otherwise be taken into account which are for the time

being owing by any member of the Consolidated Group to any other member of

the Consolidated Group;



and



so



(l)



no amount shall

calculation; and



(m)



when the aggregate amount of Borrowings required to be taken into account

for the purpose of this paragraph on any particular day is being

ascertained, any such Borrowings denominated or repayable in a currency

other than dollars shall be converted for the purpose of calculating the

dollar equivalent at the Agent's Spot Rate of Exchange on that day for the

purchase of that currency with dollars;



that:

be



taken



into



account



more



than



once



in the



same



CURRENT ASSETS means, as at the date on which it falls to be determined, the

aggregate consolidated amount of all assets of the Consolidated Group realisable

in the ordinary course of business within 12 months of such date as shown in the

Accounts for the Calculation Period during which such date falls and determined

in accordance with the Accounting Principles (for the avoidance of doubt, all

intercompany receivables having been eliminated in determining the consolidated

amount of all such assets);

CURRENT LIABILITIES means, as at the date on which it falls to be determined,

the aggregate consolidated amount of all liabilities of the Consolidated Group

payable within 12 months of such date as shown in the Accounts for the

Calculation Period during which such date falls and determined in accordance

with the Accounting Principles;

- 10

INTEREST CHARGES means the aggregate interest paid or payable by the

Consolidated Group (including guarantee commission and any other commitment,

arrangement and similar fee in respect thereof, amounts in the nature of

interest, discount charges, the interest element of rental under finance leases)

on Borrowings less interest received during the relevant period (excluding in

either case amounts paid or received intra Consolidated Group) and determined in

accordance with the Accounting Principles;

OIL AND GAS DEVELOPMENT EXPENSES means the aggregate of all expenses (including

capital expenditures) incurred in respect of any Joint Venture Document, Oil and

Gas Development Agreement or Oil and Gas Property (without duplication) as

stated in the Accounts for the relevant period and determined in accordance with

the Accounting Principles; and

REFERENCE ACCOUNTS means, at any time, the audited combined consolidated profit

and loss account and balance sheet of the Consolidated Group most recently

delivered by the Borrowers to the Agent in accordance with clause 12.1 (b).

1.3

CONSTRUCTION: Except where the context otherwise requires, any reference

in this Agreement to:

the AGENT,

transferees



and

and



the SECURITY

assigns;



TRUSTEE



include



its



successors and permitted



an AGREEMENT also includes a concession, contract, deed, franchise, licence,

treaty or undertaking (in each case, whether oral or written);

the ASSETS of any person shall be construed as a reference to the whole or any

part of its business, undertaking, property, assets and revenues (including any

right to receive revenues);

CONTROL means the ability, directly or indirectly, to appoint and/or remove all

or the majority of the board of directors or management committee of the person

or otherwise to direct its affairs in any material respect;

DERIVATIVE TRANSACTION includes any rate swap transaction, basis swap, forward

rate transaction, commodity swap, commodity option, equity linked swap, equity

or equity index option, bond option, interest rate option, foreign exchange

transaction, cap transaction, floor transaction, collar transaction, currency

swap transaction, currency option, spot or spot deferred oil or gas transaction,

forward oil or gas transaction, oil or gas option, oil or gas lease, loan or

consignment, EFP (exchange for physical), oil or gas swap, oil or gas forward

rate transaction or any other similar transaction (including any option with

respect to any of these transactions) or any combination of any of the foregoing

transactions;

a FINANCING DOCUMENT

supplements thereto;



or other agreement includes any amendments, novations or



a GUARANTEE also includes any other obligation (whatever called) of any person

to pay, purchase, provide funds (whether by way of the advance of money, the



purchase of or subscription for shares or other securities, the purchase of

assets or services, or otherwise) for the payment of, indemnify against the

consequences of default in the payment of, or otherwise be responsible for, any

indebtedness of any other person;

- 11

INDEBTEDNESS means any obligation (whether present or future, actual or

- -contingent, secured or unsecured, as principal or surety or otherwise) for the

payment or repayment of money;

a LAW includes common or customary law and any constitution, decree, judgment,

legislation, order, ordinance, regulation, statute, treaty or other legislative

measure in any jurisdiction or any present or future directive, regulation,

request or requirement (in each case, whether or not having the force of law

but, if not having the force of law, the compliance with which is in accordance

with the general practice of persons to whom the directive, regulation, request

or requirement is addressed);

a PERSON includes any corporation, association, partnership or other entity and

includes its successors and permitted transferees and assigns;

a provision of law is a reference to that provision as amended or re-enacted;

SUBSIDIARY in relation to any person means (i) any corporate entity of which

more than 50 per cent of the issued share capital or voting rights in relation

thereto is -owned directly or indirectly by such person and/or one or more

subsidiaries of such person or (ii) any corporate entity which is controlled by

such person;

references to a TIME OF DAY are to London time; headings and the table of

contents are for ease of reference only.

AMOUNT



AND



PURPOSE



2.1

AMOUNT: In accordance with the provisions of this Agreement, the Lenders

shall make an Advance to the Borrowers. The maximum aggregate principal amount

of the Facility is $30,702,500 (thirty million seven hundred two thousand five

hundred dollars).

2.2

PURPOSE: The Facility shall be used only for the purpose of refinancing

certain obligations of the Borrowers to Total pursuant to the Prepayment

Agreement between Liberty and TIL dated July 29, 1997, as amended April 6, 1998,

and to secure the release of the guarantees made by ARC and Dahomey to TIL dated

July 20, 1997 in respect of the obligations of Liberty under the aforesaid

Prepayment Agreement.

SYNDICATE



AND



BORROWERS



3.1

PARTICIPATION: Subject to the provisions of this Agreement, each of the

Lenders shall participate in the Advance under the Facility in the proportion

which its Commitment bears to the Total Commitments up to an aggregate principal

amount not exceeding its Commitment.

3.2 OBLIGATIONS

(a)



SEVERAL:



In



participating



in



the



Facility:



the rights and obligations of each of the Lenders under the Financing

Documents are several. Failure of a Lender to perform its obligations under

the Financing Documents shall neither:

- 12 -





(i)



result in the Agent, the Security Trustee or any Lender incurring any

liability whatsoever; nor



(ii) relieve the Agent, the Security Trustee, any Obligor or any Lender

from their respective obligations under the Financing Documents; and

(b)



3.3

joint



the aggregate of the amounts due to each Lender under the Financing

Documents at any time is a separate and independent debt and subject to

clause 13.2 each Lender shall have the right to protect and enforce its

rights under the Financing Documents and it shall not be necessary (except

as otherwise provided in the Financing Documents) for any other Lender or

the Agent to be joined as an additional party in any proceedings to this

end.

LIABILITY OF

and several.



BORROWERS: The obligations of each Borrower hereunder are



3.4

BORROWERS' AGENT: Each Obligor irrevocably authorises and instructs the

Borrowers' Agent to give and receive as agent on its behalf all notices and take

such other action (including, without limitation, the giving of consents, the

signing of certificates or the acceptance of any proposal) as may be necessary

or desirable under or in connection with the Financing Documents and confirms

that it will be bound by any action taken by the Borrowers' Agent under or in

connection with the Financing Documents.

3.5

Actions of

Obligors hereunder



Borrowers' Agent: The respective liabilities of each of the

shall not be in any way affected by:



(a)



any irregularity in any act done by or any failure to act by the Borrowers'

Agent;



(b)



the Borrowers' Agent acting in any respect outside any authority

upon it by any Obligor; and



(c)



the failure by or inability of the Borrowers' Agent to inform any Obligor

of receipt by it of any notification hereunder. CONDITIONS PRECEDENT



conferred



4.1

CONDITIONS TO THE FACILITY: The Facility shall become available on the

date upon which the Agent has notified the Borrowers' Agent that it received the

following documents dated not more than two days before the Drawing Date or such

earlier date as the Agent may in its discretion accept and in each case in form

and content satisfactory to the Agent:

(a)



a certificate signed by 2 directors of each of the Borrowers substantially

in the form set out in Part I of Schedule 3 and the documents therein

referred to;



(b)



a certificate in respect of each of the Original Guarantors signed by 2

directors of each of the Original Guarantors substantially in the form set

out in Part II of Schedule 3 and the documents therein referred to;



- 13

(c) opinions of the Obligors' independent legal counsel in each jurisdiction in

which an Obligor is incorporated opining as to the due execution of each of

the Financing Documents;

(d)



a letter from Ogilvie and Company describing and listing each of the Oil

and Gas Development Agreements and each of the Oil and Gas Properties of

which such firm has any knowledge or information in form and substance

satisfactory to the Agent;



(e)



a certified copy of the Joint Venture Documents and Oil and Gas Development

Agreements now in effect (including without limitation any agreements

referred to in the letter described in paragraph (d) above), and in each

case any agreements ancillary thereto in each case duly executed by all the

parties thereto, and up to date copies as at the date not more than 10 days

before the Drawing Date together with all consents, resolutions, documents



and other matters necessary for the effectiveness of the same and

appropriate

evidence that each has become wholly unconditional and

effective and none of the conditions precedent thereto has been waived

without the consent of the Lenders;

(f)



an executed copy of each of the Share Pledges, together with the share

certificates representing 100 per cent of the common stock of each of

Liberty, Dahomey and each Guarantor in the name of the respective Guarantor

or Borrower which is the pledgor under the respective Share Pledge and any

other documents required to be delivered pursuant thereto;



(g)



an executed copy of two Debentures issued by West African Resource

Corporation (each in respect of Concession 309), an executed copy of a

Debenture issued by Agbara Resources Limited in respect of Concession 310),

and an executed copy of a Debenture issued by Liberty in respect of OPL 237

and OML 112 (Deep Rights) in form and content satisfactory to the Agent;



(h)



an executed copy of the Security Trust Deed;



(i)



an executed copy of the MOPU Agreement and the Amni Guarantee;



(j)



an executed copy of a Certificate issued by Yinka Folawiyo

Company Limited in form and content satisfactory to the Agent;



(k)



an executed copy of a Certificate

of Part III of Schedule 3; and



(l)



an executed copy of the Warrant.



Petroleum



signed by each ARC Director in the form



4.2

NOTICE: The Agent shall promptly notify each of the Lenders and the

Borrowers' Agent after it has received all documents and confirmations required

pursuant to clause 4.1.

- 14

4.3

CONDITIONS TO THE ADVANCE: The Advance is subject to the further

conditions precedent that both on the date of the Drawing Notice and on the

Drawing Date no Event of Default or Potential Event of Default has occurred or

would occur as a result of making the Advance.

DRAWDOWN



OF



THE



ADVANCE



5.1

DRAWDOWN: Subject to the provisions of this Agreement,

Agent may on Business Days during the Availability Period draw

delivering to the Agent no later than 10.00 am (London time) a

Drawing Notice in the form set out in Schedule 2, specifying in

proposed Advance:



the Borrowers'

the Advance by

duly completed

respect of the



(a)



the proposed Drawing Date, which shall be a Business Day;



(b)



the amount of the Advance, which shall not exceed $30,702,500; and



(c)



the Interest Period which shall be for successive periods of three months

provided that the final Interest Period shall coincide with the Final

Maturity Date.



5.2

IRREVOCABILITY: A Drawing Notice shall be irrevocable and, subject to

the provisions of this Agreement, the Borrower named therein shall draw the

Advance on the Drawing Date specified in the Drawing Notice.

5.3

NOTICE TO LENDERS: Subject to clause 4.3, when the Agent actually

receives a Drawing Notice pursuant to clause 5.1, it shall notify each of the

Lenders of the amount of the proposed Advance and the proposed Drawing Date and

each Lender shall, subject to the provisions of this Agreement, make available

to the Agent on the Drawing Date its participation in that Advance.



INTEREST

6.1

DURATION OF PERIODS: The

duration of Interest Periods:



following



provisions



shall



apply



to the



(a)



the Interest Period for each Advance shall commence on the date of that

Advance and end on the date determined in accordance with and subject to

clause 5.1(c); and



(b)



an Interest Period which would otherwise end on a day which is not a

Business Day shall end on the next succeeding Business Day unless the

result of such extension would be that such Interest Period would end on a

day in the next following calendar month, in which event such Interest

Period shall end on the last preceding Business Day.



6.2

Period

Of

(a)



RATE:

shall



The rate of interest payable on an Advance for each Interest

be the rate per annum determined by the Agent to be the aggregate



the applicable Facility Margin; and

- 15 -





(b) (i)



the rate which appears on the display designated as the British

Bankers Association's Interest Settlement Rate as quoted on page 3750

of the Dow Jones/Telerate Monitor for dollars (or such other page or

service as may replace page 3750 on such system for the purpose of

displaying London Inter-bank offered rates for dollars of leading

banks, from time to time) as at 11.00 a.m. (London time) on the second

Business Day before the commencement of that Interest Period; or



(ii) if no such display rate is then available for dollars, the arithmetic

mean (rounded to four decimal places with the mid-point rounded up) of

the rates notified to the Agent at its request by each of the

Reference Banks as the rate at which deposits in dollars are offered

for the same period as that Interest Period by that Reference Lender

to leading banks in the London Inter-bank market at or about 11.00

a.m. (London time) on the second Business Day before the commencement

of that Interest Period; less

(c)



the Interest Adjustment.



6.3

PAYMENT: Interest under this Agreement shall accrue from the date the

Advance is made and shall be calculated on the basis of actual days elapsed (not

counting within an Interest Period the last day of that Interest Period) and a

year of 360 days and shall be paid on the Advance by the Borrower to the Agent

for the account of the Lenders in arrears on each Interest Payment Date in

dollars.

6.4

AGENT'S CERTIFICATE: The Agent shall notify the Borrowers' Agent and

each of the Lenders of the rate of interest as soon as it is determined under

this Agreement. The certificate of the Agent as to a rate of interest shall, in

the absence of manifest error, be conclusive.

6.5

FAILURE OF REFERENCE BANK: If any Reference Bank for any reason fails to

notify to the Agent the rate referred to in clause 6.2(b)(ii), subject to clause

10.3(d), the rate of interest shall be determined on the basis of the rates

notified to the Agent by the remaining Reference Lenders.

6.6

NEW REFERENCE BANK: If any Reference Bank ceases to provide rates at

which deposits in dollars are offered to leading banks in the London interbank

market:

(a)



it shall cease to be a Reference Bank; and



(b)



the Agent shall, with the approval (which shall not be unreasonably

withheld or delayed) of the Borrowers' Agent, nominate as soon as

reasonably practicable another Bank to be a Reference Bank in place of such

Reference Bank. REPAYMENT



7.1

REPAYMENT OF ADVANCES: The Borrowers shall on the Final Maturity Date

repay the Advance to the Agent for the account of the Lenders in accordance with

clause 9.1.

- 16

7.2



NETTING



OFF:



If



on



the



Drawing



Date:



(a)



a Lender is required to participate in an Advance; and



(b)



a payment is due to that Lender pursuant to this clause 7, then the Agent

shall (without prejudice to the Borrowers' obligation to make the payment

in question pursuant to this clause 7 prior to any application pursuant to

this clause and without prejudice to the Borrowers' remaining obligation in

relation to such payment after any such application) apply any amount

payable by such Lender to that Borrower on the Drawing Date in or towards

satisfaction of the amount payable by that Borrower to such Lender on such

Drawing Date pursuant to this clause 7.



7.3

Fees: In order to induce the Lenders to make the Advance hereunder the

Borrowers will pay to the Agent for the account of the Lenders a Facility Fee in

the amount of $500,000 on June 29, 1999 or such earlier date upon which the

Total Outstandings are repaid in full.

PREPAYMENT

8.1

PREPAYMENT: The Borrowers' Agent may at any time and from time to time,

serve a notice of prepayment through the Agent in respect of all or any portion

of the Advance provided that the minimum principal amount of the Advance prepaid

shall be $1,000,000 and the principal amount of any prepayment shall be in an

integral multiple of $500,000. On the date falling 5 Business Days after the

date of service of the notice, the Borrowers shall prepay the principal amount

designated in such notice. On prepaying the Advance under this clause, the

Borrowers shall pay to the Agent for the account of the Lenders accrued interest

together with all other amounts due to the Lenders in respect of such Advance

(including, without limitation, any sum payable under the indemnity contained in

clause 14.1 (a)).

PAYMENTS

9.1

MECHANICS:

payments:



The



following



provisions



shall



apply



to



the



making of



(a)



all payments by an Obligor or a Lender under this Agreement shall be made

to the Agent to its account at such office or Lender as it may notify in

writing to the Borrowers' Agent or the Lenders;



(b)



payments under this Agreement to the Agent shall be made in dollars for

value on or before 10.00 a.m. (London time) on the due date;



(c)



each payment received by the Agent under this Agreement for another person

shall, subject to paragraph (d) below, be made available by the Agent to

that person by payment (on the date and in the currency and funds of

receipt) to that person's account with such office or Lender in the

principal center of the country of the relevant currency as it may notify

to the Agent for this purpose by no less than 5 Business Days' prior

notice; and



- 17

(d) the Agent is not obliged to make payment under paragraph (c) above until it



has actually received the corresponding sum. If the Agent makes available

to a person any amount which has not been made unconditionally available to

the Agent and that amount is not actually and unconditionally made

available, the person concerned shall forthwith on notice from the Agent

repay that amount to the Agent together with interest on the amount until

its repayment at a rate determined by the Agent to reflect its cost of

funds.

9.2

NO SET-OFF OR COUNTERCLAIM: All payments made by an Obligor under this

Agreement shall be made without set-off or counterclaim.

9.3

WITHHOLDINGS: All payments by an Obligor under this Agreement, whether

in respect of principal, interest, fees or any other item, shall be made in full

without any deduction or withholding in respect of Tax or otherwise (other than

a Tax imposed on the overall net income of a Lender's Facility Office by the

jurisdiction in which such Lender is incorporated or in which the Facility

Office is located (an EXCLUDED TAX)) unless the deduction or withholding is

required by law, in which event the Obligor shall:

(a)

amount



ensure that the deduction

legally required;



or withholding does not exceed the minimum



(b)

forthwith pay to the Agent for the account of each Lender such

additional amount so that the net amount received by that Lender will equal the

full amount which would have been received by it had no such deduction or

withholding in respect of Tax (other than an Excluded Tax) been made;

(c)

pay to the relevant taxation or other authorities within the period for

payment permitted by applicable law the full amount of the deduction or

withholding (including, but without prejudice to the generality of the

foregoing, the full amount of any deduction or withholding from any additional

amount paid pursuant to this sub-clause); and

(d)

period



furnish to the Agent

for payment permitted



on

by



behalf of the Lender concerned, within the

the relevant law, either:



(i)

an official receipt of the relevant taxation or other authorities

involved in respect of all amounts so deducted or withheld; or

(ii)

if such receipts are not issued by the taxation or other authorities

concerned on payment to them of amounts so deducted or withheld, a certificate

of deduction or equivalent evidence of the relevant deduction or withholding.

- 18

If any deduction or withholding in respect of Tax or otherwise is required to be

made by the Agent in respect of any payment under this Agreement, the Obligor

concerned shall take the action referred to in paragraph (b), the certificate of

the Agent as to the amount required to be paid being conclusive, and the Agent

shall take the action referred to in paragraphs (a) and (c) and itself furnish

the documents referred to in paragraph (d).

9.4

TAX FORMS: Each Lender agrees, with respect to each Borrower and in

respect of its Facility Office for lending to such Borrower, in order to assist

such Borrower to secure the benefit of any available exemption for (or reduced

rate in respect of) any deduction or withholding for or on account of Taxes, it

shall, if requested in writing to do so by the Borrowers' Agent through the

Agent, as soon as practicable after receipt of such request, from time to time,

furnish such Borrower (at the expense of such Borrower) through the Borrowers'

Agent or the appropriate governmental or other authority, duly completed copies

of such certificates and documents as are necessary for such purpose.

9.5

amount

refund



TAX CREDITS: If and to the extent that any Obligor pays any additional

under clause 9.3(b) and any Lender receives and retains the benefit of a

of Tax or credit against Tax on its overall net income which is



identified by the Lender in its sole opinion as attributable to the tax that was

withheld or deducted (a TAX CREDIT), then that Lender shall reimburse to the

Obligor such amount as it shall determine in its absolute discretion so as to

leave that Lender, after that reimbursement, in no better or worse position than

it would have been in if payment of the relevant additional amount had not been

required. Each Lender shall have absolute discretion as to whether to claim any

Tax Credit and, if it does so claim, the extent, order and manner in which it

does so and in which reliefs and credits are to be regarded as used for these

purposes. No Lender shall be obliged to disclose any information regarding its

tax affairs or computations to any Obligor and its certificate as to the amount

to be reimbursed shall, in the absence of manifest error, be conclusive and

shall not be questioned by the Obligor.

9.6

DATE: If any payment would otherwise be due on a day which is not a

Business Day, it shall be due on the next succeeding Business Day unless the

result of such an extension would be that such payment would be due on a day in

the following calendar month, in which event such payment shall be due on the

last preceding Business Day.

9.7

with

(a)



DEFAULT INTEREST:

this Agreement:



If



a Borrower fails to pay any amount in accordance



the Borrower shall pay interest on that amount from the time of default up

to the time of actual payment (as well after as before judgment) at the

rate per annum which is the sum of

(i)



the Facility Margin plus two per cent; and



(ii) the rate (as determined by the Agent) for a deposit in dollars of an

amount comparable to the defaulted amount, offered to the Agent in the

London Inter-bank market, for such period as the Agent may from time

to time select, at or about 10.00 a.m. (London time) on the Business

Day succeeding that on which the Agent becomes aware of the default

for value two Business Days later;

- 19

(b) if an amount unpaid in accordance with this Agreement is of principal due

on a day during, but not the last day of, an Interest Period relating

thereto, the period selected by the Agent under clause 9.7(a) shall equal

the unexpired portion of the Interest Period and there shall be substituted

for the rate specified in clause 9.7(a) the rate of one per cent. above the

rate calculated in accordance with clause 6.2 and applicable to the unpaid

amount immediately before it fell due;

(c)



interest under this clause shall accrue daily on the basis of a year of 360

days from and including the first day to the last day of each period for

which a rate of interest is determined under this clause and shall be due

and payable by the Borrower at the end of each such period. So long as the

default continues, the rate referred to in clause 9.7(a) shall be

calculated on a similar basis at the end of each period selected by the

Agent and notified to the Lenders and interest payable under this

sub-clause which is unpaid at the end of each such period shall thereafter

itself bear interest at the rates provided in this sub-clause.



9.8

JUDGMENT CURRENCY: If, under any applicable law, whether as a result of

a judgment against an Obligor or the liquidation of an Obligor or for any other

reason, any payment under or in connection with this Agreement is made or is

recovered in a currency (the other currency) other than that in which it is

required to be paid hereunder (the original currency), then, to the extent that

the payment to any Lender (when converted at the rate of exchange on the date of

payment or, in the case of a liquidation, the latest date for the determination

of liabilities permitted by the applicable law) falls short of the amount unpaid

under this Agreement, the Obligor shall as a separate and independent

obligation, fully indemnify that Lender against the amount of the shortfall; and



for the purposes of this sub-clause rate of exchange means the rate at which the

Lender concerned is able on the relevant date to purchase the original currency

in London with the other currency.

9.9

CERTIFICATES: Any determination or notification by the Agent or any

Lender concerning any rate or amount under this Agreement shall, in the absence

of manifest error, be conclusive evidence as to that matter.

CHANGES IN CIRCUMSTANCES

10.1

ILLEGALITY: Where the introduction, imposition or variation of any law

or any change in the interpretation or application of any law makes it unlawful

or impractical without breaching such law for any Lender to allow all or part of

its participation in this Facility to remain outstanding or to fund all or part

of its participation in an Advance or to carry out all or any of its other

obligations under this Agreement or to charge or receive interest at the rate

applicable under this Agreement, upon that Lender notifying the Agent:

(a)



the Agent shall notify the Borrowers' Agent and that Lender's Commitment

shall forthwith be reduced to the extent necessary to cure such illegality;



- 20

(b) the Borrower shall, within 5 Business Days of being so notified (and only

to the extent necessary to cure such illegality), prepay to the Agent for

the account of that Lender that Lender's participation in the Advance and

any accrued interest thereon in accordance with the provisions of clause

8.1.

10.2

INCREASED COSTS: Where any Lender determines that the introduction or

variation of any law or any change in the interpretation or application of any

law or compliance with any request (whether or not having the force of law) from

any central bank or other fiscal, monetary or other authority or agency would

increase the cost, whether by loss of reliefs or other benefits that would

otherwise have been available or otherwise, to that Lender (or the holding

company of that Lender) of making or maintaining or funding that Lender's

Commitment or reduce the amount of any sum received or receivable by that Lender

in respect of its Commitment or oblige it (or its holding company) to make any

payment or suffer any cost or loss of relief or other benefits (except in

respect of tax on overall net income) or forego any interest or other return on,

or calculated by reference to, the amount of any sum received or receivable by

that Lender from an Obligor under this Agreement or reduce the effective return

to it (or its holding company) under this Agreement or on its (or its holding

company's) overall capital as a result of its entry into and/or compliance with

this Agreement, then:

(a)



that Lender shall notify the Borrowers' Agent through the Agent of such

event promptly upon its becoming aware of such event; and



(b)



such Obligor shall on demand pay, against evidence of the amount claimed,

to the Agent for the account of that Lender or its holding company such

amounts as that Lender from time to time and at any time notifies the Agent

to be necessary to compensate it, or its holding company, for such

increased cost, reduction, payment or foregone interest or return.



10.3



MARKET



DISRUPTION:



If,



in



relation



to



any



Advance:



(a)



the Agent (after consultation with the Reference Banks) determines that, by

reason of circumstances affecting the London Inter-bank market generally,

reasonable and adequate means do not or will not exist for ascertaining

under clause 6.2 a rate of interest applicable to an Advance; or



(b)



the Agent is notified by the Majority Lenders that deposits in dollars are

not in the ordinary course of business available in the London Inter-bank

market for a period equal to the forthcoming Interest Period in amounts

sufficient to fund their participations in an Advance; or



(c)



the Agent is notified by Lenders which are banks (the AFFECTED LENDERS)

whose Commitments aggregate more than 30 per cent. of the Total Commitments

that the arithmetic mean of the offered quotations or rates referred to in

clause 6.2(b) does not represent their effective cost of funding their

participations in such Advances during the forthcoming Interest Period; or



(d)



only one Reference Lender notifies a rate to the Agent in accordance with

clause 6.2(b)(ii), the Agent shall forthwith notify the Borrowers' Agent

and each Lender, and:

- 21 -





(e) no further

exist;



Advances



shall be made while such



circumstances



continue



to



(f)



unless within thirty days of the giving of the notice, the Borrowers' Agent

and the Agent (in consultation with the Lenders or, in the case of (c), the

Affected Lenders) arrive, by negotiation in good faith, at an alternative

basis acceptable to the Borrowers' Agent and the Lenders for continuing the

Facility or the participations of the Affected Lenders (and any alternative

basis agreed in writing shall be retroactive to and effective from the

commencement of the relevant Interest Period) the Commitments of the

Lenders or, in the case of (c), the Affected Lenders, shall be canceled and

the Borrowers shall prepay to the Agent for the account of the Lenders the

Total Outstandings or, in the case of (c), the participations of the

Affected Lenders, within 10 Business Days after the end of the 30 day

period with accrued interest payable to each Lender or Affected Lender, as

applicable, at a rate equal to the Facility Margin plus the aggregate of

the amounts certified by such Lender, and notified through the Agent to the

Borrowers' Agent, as being the cost to that Lender of continuing to fund

its Outstandings during the two periods referred to in this paragraph; and



(g)



while any agreed alternative basis is in force, the Agent in consultation

with the Lenders or, in the case of (c), the Affected Lenders, shall

periodically (but at least monthly) determine whether circumstances are

such that the basis is no longer necessary; and if the Agent so determines,

it shall forthwith notify the Borrowers' Agent and each Lender and that

basis shall cease to be effective on a date specified by the Agent after

consultation with the Lenders.



10.4



TAX:



If



and



to



the



extent



either:



(a)



an amount deducted or withheld from any payment, or an additional amount

payable for the account of any Lender by reason of a deduction or

withholding, pursuant to clause 9.3; or



(b)



an amount in respect of increased costs payable pursuant to clause 10.2, is

brought into account by a Lender as a receipt for the purposes of taxation

and proves inadequate, by reason of the absence of a credit, deduction or

other relief which is (in any case) immediately and effectively received,

fully and immediately to indemnify the relevant Lender on an after-tax

basis against the cost, payment, deduction or withholding in question; then

in either case the Obligor will on demand pay such further sum to the Agent

for the account of the Lender as is necessary to remedy the inadequacy.



- 22

10.5

MITIGATION: If a Lender becomes aware of circumstances that will or are

likely to lead to that Lender serving a notice under clause 10.1 or additional

amounts becoming payable under clause 10.2 or clause 9.3, that Lender shall

promptly notify the Agent accordingly, whereupon the Agent shall notify the

Borrowers' Agent and such Lender shall, without prejudice to the obligations of

any of the Borrowers, take such steps as are reasonably open to it to mitigate

the effects of those circumstances (including, without limitation, the transfer



of its rights and obligations hereunder to another Facility Office or to any

other bank or financial institution willing to assume its participation in the

Facility). Nothing in this clause imposes a legal obligation on any Lender to

take any steps that might be prejudicial to it or which might conflict with its

general banking policies.

10.6

CERTIFICATES AND INFORMATION: The certificate of the Agent or the

relevant Lender as to the amount that is payable under clause 10.2, 10.3 or 10.4

shall, in the absence of manifest error, be conclusive and nothing in this

clause 10 shall oblige any Lender to disclose any information regarding its

affairs or business to any Obligor.

REPRESENTATIONS



AND



WARRANTIES



11.1

ON SIGNING: Each Obligor acknowledges that each of the Lenders, the

Agent and the Security Trustee has entered into the Financing Documents, and

that the Security Trustee has consented to be Security Trustee in relation

thereto in each case in full reliance on representations by each Obligor in the

following terms, and each Obligor now represents and warrants to each of them in

respect of itself (and each of the Borrowers warrants and represents in relation

to the Consolidated Group in clauses 11.1 (g), (h), (i), (j) and (k)) that:

(a)



Status: it is duly incorporated with limited liability, validly existing

and in good standing, under the laws of its place of incorporation (except

where failure to be so qualified would not reasonably be expected to have a

Material Adverse Effect) and is duly qualified and authorised to do

business and is in good standing in each other jurisdiction in which the

conduct of its business requires it to be so qualified or authorised

(except where failure to be so qualified would not reasonably be expected

to have a Material Adverse Effect);



(b)



POWERS AND AUTHORISATIONS: the documents which contain or establish its

constitution include provisions which give power, and all necessary

corporate authority has been obtained and action taken, for it to own its

assets, carry on its business and operations as they are now being

conducted, to sign and deliver, and perform the transactions contemplated

in, the Financing Documents to which it is a party and the Financing

Documents to which it is a party constitute valid and binding obligations

on it enforceable in accordance with their terms;



(c)



NON-VIOLATION: neither the signing and delivery of the Financing Documents

to which it is a party nor the performance of any of the transactions

contemplated in any of them does or will contravene or constitute a default

under, or cause to be exceeded, any limitation on it or the powers of its

directors imposed by or contained in:

(i)



any law, rule, regulation, writ, order, determination

which it or any of its assets is bound or affected;



or award by



(ii) any document which contains or establishes its constitution; or

(iii)any agreement to which it or any of its subsidiaries is a party or by

which any of its or their assets is bound,

- 23

which default could be reasonably expected to have a material adverse effect on

the business, properties, results of operations or financial condition of the

Consolidated Group (a MATERIAL ADVERSE EFFECT);

(d)



Consents: no authorisation,

approval,

consent, licence,

exemption,

registration, recording, filing or notarisation and no payment of any duty,

charge or tax and no other action whatsoever is necessary or desirable to

ensure the validity,

legality,

enforceability

or priority of the

liabilities and obligations of it or the rights of the Lenders, the Agent



or the Security Trustee (or any of them) under the Financing Documents

except such authorizations, etc. as have been obtained or will be obtained

within 30 days following the Drawing Date;

(e)



NO DEFAULT: no event has occurred which constitutes, or which with the

giving of notice and/or the lapse of time and/or a relevant determination

would constitute, a contravention of, or default under, any Joint Venture

Document or Oil and Gas Development Agreement or any other agreement or

instrument by which it or any of its assets is bound or affected, being a

contravention or default which could reasonably be expected to have a

Material Adverse Effect or materially and adversely affect its ability to

observe or perform its obligations under the Financing Documents to which

it is a party except as disclosed in a certificate executed in accordance

with Clause 4.1(a) or (b);



(f)



LITIGATION: no litigation, arbitration or administrative proceeding or

claim which by itself or together with any other such proceedings or claims

could reasonably be expected to have a Material Adverse Effect or

materially and adversely affect its ability to observe or perform its

obligations under the Financing Documents to which it is a party, is

presently in progress or pending or, to the knowledge of any Obligor,

threatened against it or any of its assets except as disclosed in a

certificate executed in accordance with Clause 4.1(a) or (b);



(g)



Tax: no member of the Consolidated Group is in default in the payment of

any taxes which could reasonably be expected to have a Material Adverse

Effect, and no material claim is being asserted with respect to taxes which

is not disclosed in the most recent Accounts except as disclosed in a

certificate executed in accordance with Clause 4.1(a) or (b);



(h)



ACCOUNTS:

(i)



the statement of the Consolidated Group as at December 31, 1997

prepared by

Deloitte & Touche has been

prepared on a basis

consistently applied in accordance with the Accounting Principles and

gives a true and fair view of the Consolidated Group for that year and

the state of the affairs of the Consolidated Group at that date, and

in particular

accurately

disclose or reserve against all the

liabilities (actual or contingent) of the Consolidated Group as a

whole that are required to be disclosed or reserved against in

accordance with the Accounting Principles; and



- 24

(ii) the most recent financial statements of the Consolidated Group

delivered to the Agent pursuant to clause 12.1(b) below have been

prepared on a basis consistently applied in accordance with the

Accounting Principles and give a true and fair view of the results of

its operations for that year and the state of its affairs at that date

and in particular accurately disclose or reserve against all the

liabilities (actual or contingent) that are required to be disclosed

or reserved against in accordance with the Accounting Principles;

(i)



ENVIRONMENT:

(i)



so far as any officer or director is aware, it has at all times

complied with all Environmental Laws and Environmental Licences in all

material respects and obtained and maintained in full force and effect

in all material respects all Environment Licences and there are no

facts or circumstances entitling any such Environmental Licences to be

revoked, suspended, amended, varied, withdrawn or not renewed; and



(ii) so far as any officer or director is aware, no Material Environmental

Claim is pending or has been made or threatened against any member of



the Consolidated Group, save to the extent that the same is a

notification or order requiring compliance with the terms of any

Environmental Licence or Environmental Law which is in the process of

being complied with in the time specified therein for compliance;

(j)



MATERIAL ADVERSE CHANGE: there has been no material adverse change in the

consolidated financial condition of the Consolidated Group since the date

referred to in paragraph (h)(i);



(k)



NO SECURITY: none of the assets of any member of the Consolidated Group is

affected by any Security Interest, and no member of the Consolidated Group

is a party to, nor is it or any of its assets bound by, any order,

agreement or instrument under which any member of the Consolidated Group

is, or in certain events may be, required to create, assume or permit to

arise any Security Interest, other than any Permitted Security Interest;



(l)



CERTIFICATES: the information provided in the Certificates executed in

accordance with clause 4.1, when prepared and as of the date of this

Agreement:

(i)



is true and accurate in all material respects and is not misleading in

any material respect; and



(ii) does not omit to state any fact necessary to make such information not

misleading in any material respect;

(m)



INFORMATION: the information furnished from time to time by the Borrowers

in connection with the Facility is true and accurate in all material

respects and is not misleading in any material respect when so furnished;

- 25 -





(n)



SUBSIDIARY GUARANTORS: the Subsidiaries of each Obligor which the Agent has

requested to the Borrowers' Agent accede to this Agreement have acceded to

this Agreement as Additional Guarantors or are the Original Guarantors; and

each Subsidiary of each Obligor has been notified to the Agent within not

more than ten days following the date upon which such Person has become a

Subsidiary of any Obligor.



11.2

AFTER SIGNING: Each Obligor shall be deemed to represent and warrant

to each of the Lenders, the Agent and the Security Trustee on each day that the

Advance or any portion thereof is outstanding, with reference to the facts and

circumstances then subsisting, that each of the representations and warranties

made by it contained in clause 11.1 (other than paragraph (h)(i) and (j)) and

each certificate issued pursuant to clause 12.1(b)(iv) remains true, accurate

and correct.

UNDERTAKINGS

12.1

ACCOUNTS AND INFORMATION: Each Borrower undertakes with each of the

Lenders, the Agent and the Security Trustee that, from the date of this

Agreement until all its liabilities under the Financing Documents have been

discharged:

(a)



PREPARATION OF ACCOUNTS: it will prepare the financial statements referred

to in paragraph (b) on a basis consistently applied in accordance with the

Accounting Principles and those financial statements shall give a true and

fair view of the results of the Consolidated Group for the period in

question and the state of the affairs of the Consolidated Group as at the

date to which the financial statements are made up and shall accurately

disclose or reserve against all the liabilities (actual or contingent) of

the Consolidated Group required to be disclosed or reserved against in

accordance with the Accounting Principles;



(b)



INFORMATION: it will deliver to the Agent in sufficient numbers for each of

the Lenders:

(i)



as soon as they become available (and in any event within 105 days of

31 December in each year) copies of the audited combined consolidated

and consolidating financial statements for the twelve-month period

then ended of the Consolidated Group which shall be shown in dollars,

contain an income statement, a balance sheet and a cash flow statement

and be audited and certified by a firm of independent accountants of

recognised international standing;



(ii) as soon as they become available (and in any event within 60 days of

the end of each of its financial quarters) copies of the unaudited

consolidated and consolidating financial statements for that financial

quarter of the Consolidated Group each of which shall contain an

income statement and a balance sheet;

- 26

(iii)promptly, all notices or other documents despatched by each Borrower

to its shareholders or Oil and Gas Partners (or in either case, any

class thereof) and, in the case of ARC, to the Toronto Stock Exchange

(including, without limitation, the Borrowers' annual budget and

business plan for each calendar year) or its creditors generally;

(iv) within 10 days following the close of each calendar month, an Officers

Certificate signed by two Directors of ARC in the form of Part III of

Schedule 3 describing any changes in the information set forth in the

Certificate given since the delivery of the previous certificate; and

(v)



promptly, such additional financial or other information as the Agent

may from time to time reasonably request.



12.2

GENERAL UNDERTAKINGS: Each Obligor undertakes with each of the Lenders,

the Agent and the Security Trustee that, from the date of this Agreement until

all its liabilities under the Financing Documents have been discharged:

(a)



CONSENTS: it will obtain and promptly renew from time to time, and will

promptly deliver to the Agent certified copies of, any authorisation,

approval, consent, licence, exemption, registration, recording, filing or

notarisation as may be necessary or desirable to ensure the validity,

enforceability or priority of the liabilities and obligations of it or the

rights of the Lenders, the Agent and the Security Agent (or any of them)

under the Financing Documents to which it is a party and it shall comply

with the terms of the same;



(b)



DEFAULT: if it becomes aware of the occurrence of an Event of Default or

Potential Event of Default it will forthwith notify the Agent and provide

the Agent with full details of any steps which it is taking, or is

considering taking, in order to remedy or mitigate the effect of the Event

of Default or Potential Event of Default or otherwise in connection with

it;



(c)



LITIGATION: promptly, and in any event within 10 days, after becoming aware

of the same inform the Agent of any

litigation,

arbitration

or

administrative proceeding or claim of the kind described in clause 11.1

(f);



(d)



INSURANCE: it will:

(i)



procure that it takes out and maintains insurance cover over its

assets and undertaking with reputable underwriters or insurance

companies (including, without limitation,

reinsurance companies)

reasonably acceptable to the Agent, of a type and in an amount which

is consistent with good business practice in the precious metal



industry;

(ii) punctually pay all premiums and other sums payable

taken out pursuant to this clause 12.2(d);



under each policy



- 27

(iii)upon receipt of a written request from the Agent to such effect,

deliver to the Agent such information as to the policies of insurance

taken out pursuant to this clause 12.2(d) (or as to any matter which

may be relevant to such insurances) as the Agent may reasonably

request and upon renewal of any such policy, produce to the Agent, on

or before its expiry date, evidence of such renewal;

(iv) promptly upon becoming aware of the same notify the Agent of any

insurance claim where the amount of such claim exceeds $5,000,000 (or

its equivalent, on the date on which the claim is made, in the

currency in which such claim is made) or such other amount as may,

from time to time, be specified by the Agent;

(v)



procure that no material reductions in limits or coverage (including

those resulting from extensions) or material increases in deductibles,

exclusions or exceptions shall be made to any insurance effected

pursuant to this clause 12.2(d) without the prior consent of the

Agent;



(vi) not, at any time, do (or omit to do), anything whereby any of the

insurances taken out under this clause 12.2(d) may be rendered void,

voidable, unenforceable, suspended or impaired in whole or in part or

which may otherwise render any sum paid out under any such policy

repayable in whole or in part;

(vii)promptly upon becoming aware thereof, inform the Agent of any

substantial change in the insurances on and in relation to its

business and assets;

(e)



PARI PASSU RANKING: its unsecured obligations under this Agreement do and

will rank at least pari passu with all its other present and future

unsecured obligations other than obligations in respect of national,

provincial and local taxes and employees' remuneration and taxes and for

certain other statutory exceptions;



(f)



ENVIRONMENT: it will:

(i)



comply in all material respects with the terms and conditions of all

laws, regulations, agreements, licences and concessions including,

without limitation, all Environmental Laws and all Environmental

Licences, all Applicable Laws and all Licences and Permissions;



(ii) save as disclosed in writing to the Agent on or prior to the date

hereof, ensure that no Substance is at or brought on to any property

owned, leased or occupied by any member of the Consolidated Group

which may give rise to a Material Environmental Claim and shall take

or procure the taking of all necessary action to deal with, remedy or

remove from such property or prevent the incursion of (as the case may

be) the Substance in order to prevent such Environmental Claim (or in

order to comply with any notification or order requiring compliance

with the terms of any Environmental Licence or Environmental Law

within the time specified therein for such compliance) and in a manner

that complies in all material respects with all requirements of

Environmental Law;

- 28

(g) RECORDS ETC: at any reasonable



time and from time to time upon



reasonable



notice,

it will permit the Agent or any Lender or any agent or

representative thereof to examine and make copies of and abstracts from the

records and books of account of, and visit the properties of it to discuss

its affairs, finances and accounts with any of their respective officers

and directors and its independent accountants, at the expense of the Agent

or Lender, unless a Potential Event of Default or Event of Default shall

have occurred and be continuing in which case at the expense of the

Borrowers;

(h)



INTELLECTUAL PROPERTY: preserve and maintain in all material respects the

substance and the validity of the Intellectual

Property and where

appropriate,

use its best endeavours to protect and safeguard the

Intellectual Property which is material from and against theft, loss,

destruction, unauthorised access, copying or use by third parties; and



(i)



TAX RETURNS: except with respect to tax matters relating to the alleged

failure of Liberty Technical Services Limited and Abacan Technical Services

Inc to make past payments to the Nigerian government in connection with the

operation of OPL 237 and OML 112, ensure all necessary tax returns and

filings are delivered by or on behalf of each member of the Consolidated

Group in accordance with applicable laws and regulations and promptly

provide to the Agent a complete and correct copy of each such tax return;



(j)



ADDITIONAL GUARANTORS: promptly (and in all cases within 30 days) following

the close of each calendar month it will procure that each Subsidiary

(other than an Original Guarantor and any Subsidiary that has previously

issued a Guarantor Accession Deed) not earlier notified to the Agent. At

the request of the Agent the Borrowers will cause any Subsidiary of any

Obligor to execute a Guarantor Accession Deed in the form of Schedule 5

duly completed and signed by the Borrowers' Agent and such Subsidiary, and

deliver to the Agent (x) a certificate signed by 2 directors of such

Subsidiary substantially in the form set out in Schedule 3 and the

documents referred to therein; and (y) an opinion of an independent firm of

lawyers acceptable to the Agent;



(k)



FUTURE DEBENTURES: promptly (and in all cases within 30 days) following the

written request of the Agent to the Borrowers' Agent, any Obligor as to

which the Agent has made such request shall enter into a Debenture in form

and content and covering any property or interests requested as may be

requested by the Agent (provided that the reasonable value of the property

covered by such Debenture is $500,000 or more), and provided further that

all necessary authorisations, approvals or consents are or can reasonably

be obtained.



12.3

NEGATIVE UNDERTAKINGS: Each Obligor undertakes with each of the

Lenders, the Agent and the Security Trustee that, from the date of this

Agreement until all its liabilities under the Financing Documents have been

discharged:

(a)



SECURITY: it will not and will procure that no Subsidiary will:

- 29 -





(i)



create or permit to subsist any Security Interest on the whole or any

part of its present or future property, assets or revenues;



(ii) sell or otherwise dispose of any of its assets on terms whereby such

property or asset is or may be leased to or re-acquired or acquired by

it (except to the extent that the proceeds of such sale or disposition

are applied to the repayment of loans made to it);

(iii)sell or otherwise dispose of any of its receivables on recourse terms

except for the discounting of bills or notes in the ordinary course of

business; except for Permitted Security Interests;



(b)



DISPOSALS: without the prior written consent of the Agent, such consent not

to be unreasonably withheld in circumstances where in the opinion of the

Majority Lenders the interests of the Lenders are reasonably protected

after taking into account the reasonable requirements of the Obligors to

develop their assets, it will not, and will procure that no Subsidiary

will, either in a single transaction or in a series of transactions whether

related or not and whether voluntarily or involuntarily, sell, transfer,

lease or otherwise dispose of all or any material part of their property or

assets except that, without limitation, the following disposals shall not

be taken into account:

(i)



disposals made with the prior consent of the Majority Lenders;



(ii) disposals (other than any disposal in respect of an Oil and Gas

Property, any interest under a Joint Venture Document or any Interest

under an Oil and Gas Development Agreement) (including repayment of

loans) made in the ordinary course of business of the disposing

entity;

(iii)disposals of property or assets (other than any disposal in respect

of an Oil and Gas Property, any interest under a Joint Venture

Document or any Interest under an Oil and Gas Development Agreement)

in exchange for other property or assets comparable as to type and

value;

(iv) any other disposal (other than any disposal in respect of an Oil and

Gas Property, any interest under a Joint Venture Document or any

Interest under an Oil and Gas Development Agreement) made for market

value in money or money's worth on an arm's length basis in any

financial year which, when aggregated with disposals made in that

financial year, does not exceed $1,000,000;

(c)



Accounting Reference Date: it will not, without the prior consent of the

Agent, change the date of its financial year end or that of any member of

its Group from 31 December;



- 30

(d) DIVIDENDS: it will not declare, make or pay any dividend or other

distribution to its shareholders or vote or consent to do any of the

foregoing with respect to its Oil and Gas Partners (except as otherwise

expressly

required in the Joint Venture Documents or Oil and Gas

Development Agreements).

(e)



PROCEEDS OF ADVANCES: it will not, and will procure that no Subsidiary

will, use the proceeds of any Advance other than as permitted under clause

2.2.



(f)



SHARE SALES: without the prior written consent of the Agent, such consent

not to be unreasonably withheld in circumstances where in the opinion of

the Majority Lenders the interests of the Lenders are reasonably protected

after taking into account the reasonable requirements of the Obligors to

develop their assets, it will not, and will procure that no Subsidiary

will, dispose of all or any part of the share capital, partnership capital

or capital stock of any other Obligor;



(g)



Derivatives: it will not, and will procure that no member of the Group

will, enter into any derivative transaction which is not entered into in

the ordinary course of business and for the purposes of hedging future

exposure to fluctuations in values of assets or liabilities in relation to

which the net exposure thereunder could reasonably be expected to be

greater than $2,000,000 or otherwise to have a major impact on the business

of such person; and



(h)



RING-FENCING OF OBLIGORS:



it will not, and will procure that no Subsidiary



will:

(i)



make any loan or lease to or

investment in any member of the

Obligor;



grant any credit to or make any

Consolidated Group which is not an



(ii) sell, transfer, lease or otherwise dispose of all or any part of its

property or assets for less than market value to any member of the

Consolidated Group which is not an Obligor;

(iii)purchase, acquire or otherwise receive a transfer or lease in any

property or assets of any member of the Consolidated Group which is

not an Obligor for more than market value;

(iv) issue any guarantee in respect of indebtedness

Consolidated Group which is not an Obligor; or

(v)



of any member of the



deal or contract with, or provide to or receive services from, any

member of the Consolidated Group which is not an Obligor except on

arm's length terms and for full consideration.



12.4

ACCOUNTING PRINCIPLES: except as otherwise expressly provided in this

Agreement, all accounting terms used herein shall be interpreted, and all

matters required to be delivered to the Agent hereunder shall be prepared, in

accordance with the Accounting Principles used in the preparation of the audited

financial statements as at December 31, 1997 referred to under clause 12.1(b)(i)

hereof.

- 31

12.5

JOINT VENTURE DOCUMENTS AND OIL AND GAS DEVELOPMENT AGREEMENTS: Each of

the Borrowers agrees that it shall:

(a)



observe and perform all the obligations on its part contained in and

assumed by it under the Joint Venture Documents and Oil and Gas Development

Agreements;



(b)



to the extent that, in the opinion of the Agent, it is commercially

reasonable to do so, take all reasonable steps to enforce the performance

by the Oil and Gas Partners of each of their respective obligations under

the Joint Venture Documents and Oil and Gas Development Agreements and

diligently pursue any remedies available to it in respect of any breach of

any of the Joint Venture Documents or Oil and Gas Development Agreements or

in respect of any claim arising thereunder or in relation thereto;



(c)



to the extent that, in the opinion of the Agent, it is commercially

reasonable to do or not to do so, not give, withhold or grant any consent,

waiver, release, notice, approval or discharge to any Oil and Gas Partner

in respect of its rights or obligations under the Joint Venture Documents

which or Oil and Gas Development Agreements;



(d)



forthwith upon becoming aware of the same notify the Agent of any breach by

it or any other party to the Joint Venture Documents or Oil and Gas

Development Agreements of any provision thereof or any dispute relating

thereto;



(e)



not sell, transfer, sign or otherwise dispose of or create any Security

Interest over its rights, title or interest in the Joint Venture Documents

or Oil and Gas Development Agreements or Oil and Gas Properties; and



(f)



not cause, suffer or permit any

Venture Document.



amendment



or



modification



in any Joint



12.6

CERTAIN AGREEMENTS WITH THIRD PARTIES: Each of the Obligors agrees that

it will not and will not permit any Subsidiary to enter into or commit to enter



into any agreement with any third party in respect of the sale of any Oil and

Gas or Oil and Gas Property or enter into any Oil and Gas Development Agreement

or any interest therein or enter into or commit to enter into any Oil and Gas

Development Agreement without the prior written consent of the Agent (such

consent not to be withheld in circumstances where in the opinion of the Majority

Lenders the interests of the Lenders are reasonably protected after taking into

account the reasonable requirements of the Borrowers to develop the Oil and Gas

Properties).

DEFAULT

13.1

EVENTS: If any of the events set out below occurs, the Agent, the

Security Trustee and the Lenders may take any action as is provided for in any

of the Financing Documents:

(a)



NON-PAYMENT: any Obligor fails to pay any amount due under any

Document on the due date or on demand, if so payable;



Financing



- 32

(b) Breach of principal obligations: any Obligor fails to observe or perform

any of its obligations under clauses 12.1 (a), 12.2 (b), (c), (e), (j),

12.3, 12.4, 12.5 or 12.6 of this Agreement;

(c)



BREACH OF OTHER OBLIGATIONS: any Obligor fails to observe or perform any of

its obligations under the Financing Documents (other than those referred to

in clauses 13.1 (a) or (b) above) and, if the same is capable of remedy

within 20 days, the same is not remedied within 20 days after the relevant

failure in observation or performance;



(d)



MISREPRESENTATION: any material representation, warranty or statement which

is made (or deemed or acknowledged to have been made) by any Obligor in the

Financing Documents or which is contained in any certificate, written

statement, legal opinion or written notice provided under or in connection

with the Financing Documents proves to be incorrect;



(e)



Invalidity: any provision of any of the Financing Documents is or becomes,

for any reason, invalid or unenforceable;



(f)



CESSATION OF BUSINESS: any member of the Consolidated Group changes or

threatens to change the nature or scope of its business, suspends or

threatens to suspend a substantial part of the present business operations

which it now conducts directly or indirectly, or any governmental authority

expropriates or threatens to expropriate all or part of its assets or any

Joint Venture Partner cancels or gives written or constructive notice of

intention to cancel and Joint Venture Document or any Joint Venture

Document expires and the result of any of the foregoing is, in the

determination of the Majority Lenders, materially and adversely to affect

the financial condition of either of the Groups, or any Obligor's ability

to observe or perform its obligations under any Financing Document to which

it is a party;



(g)



CROSS-DEFAULT: default shall be made with respect to any agreement or other

evidence of indebtedness or liability for borrowed money, or a guarantee

for any of the foregoing, in excess of $1,000,000 (or its equivalent in any

other currency) (other than hereunder) of any member of the Consolidated

Group if the effect of such default is to accelerate the maturity of such

indebtedness or liability or to require the prepayment thereof or to permit

the holder or holders thereof (or a trustee on behalf of the holder or

holders thereof) to cause such indebtedness to become due prior to the

stated maturity thereof, or any such indebtedness or liability shall become

due and shall not be paid prior to the expiration of any period of grace,

provided, that the aforesaid -------- provisions shall not apply to any

indebtedness outstanding on the date of this Agreement which is referred to

in any certificate delivered hereunder and is identified as being in



default;

- 33

(h) APPOINTMENT OF RECEIVER, LEGAL PROCESS: an encumbrancer takes possession

of, or a trustee or administrative or other receiver or similar officer is

appointed in respect of, all or any part of the business or assets of any

member of the Consolidated Group, or distress, judgment, judgment, lien,

execution, writ, warrant of attachment or other legal process is levied or

enforced upon or sued out against any such assets and is not discharged

within seven days of being levied, enforced or sued out, or any Security

Interest which may for the time being affect any of its assets becomes

enforceable;

(i)



INSOLVENCY: any member of the Consolidated Group is unable to pay its debts

or becomes unable to pay its debts as they fall due or suspends or

threatens to suspend making payments (whether of principal or interest)

with respect to all or any class of its debts;



(j)



COMPOSITION: any member of the Consolidated Group convenes a meeting of its

creditors or proposes or makes any arrangement or composition with, or any

assignment for the benefit of, its creditors;



(k)



ADMINISTRATION, WINDING UP: a petition is presented or a meeting is

convened for the purpose of considering a resolution or other steps are

taken for making an administration order against or for the winding up of

any member of the Consolidated Group or an administration order or a

winding up order is made against any member of the Consolidated Group

(other than for the purposes of and followed by a reconstruction previously

approved in writing by the Majority Lenders, unless during or following

such reconstruction any member of the Consolidated Group becomes or is

declared to be insolvent);



(l)



ANALOGOUS PROCEEDINGS: anything analogous to any of the events specified in

paragraphs (f), (g), (h), (i), (j) or (k) occurs under the laws of any

applicable jurisdiction;



(m)



MATERIAL ADVERSE CHANGE: any event or series of events whether related or

not occurs which would be likely materially and adversely to affect the

financial condition of either of the Consolidated Group or the ability of

any Obligor to perform its obligations under any of the Financing

Documents;



(n)



CHANGE OF CONTROL OR OWNERSHIP: without the prior written consent of the

Agent, such consent not to be unreasonably withheld in circumstances where

in the opinion of the Majority Lenders the interests of the Lenders are

reasonably protected after taking into account the reasonable requirements

of the Obligors to develop their assets, any person whether alone or

together with other persons acting in association with it, acquires control

of any of the Obligors and/or there is a change in ownership of the share

capital of the Obligors;



- 34

(o) JOINT VENTURE DOCUMENTS OR GAS DEVELOPMENT AGREEMENTS: without the prior

written consent of the Agent, such consent not to be unreasonably withheld

in circumstances where in the opinion of the Majority Lenders the interests

of the Lenders are reasonably protected after taking into account the

reasonable requirements of the Obligors to develop their assets, any

amendment, modification or variation is made to any of the Joint Venture

Documents or material Oil and Gas Development Agreement (such materiality

to be determined by the Agent), any party thereto is in default under or

commits a breach of any of the Joint Venture Documents or material Oil and

Gas Development Agreement (such materiality to be determined by the Agent),

or any of the Joint Venture Documents is terminated or expires, and any



such event could in the opinion of the Majority

expected to have a Material Adverse Effect;

(p)



Lenders



reasonably



be



ENVIRONMENTAL MATTERS: any Environmental Claim in which there is a

reasonable likelihood of any adverse decision is brought against any member

of the Consolidated Group which, if adversely decided, would be likely to

entitle any person to shut down or suspend all or any material part of the

business of any member of the Consolidated Group, or result in any cost,

claim, liability, expense or damages in excess of $5,000,000 to be suffered

or incurred by any member of the Consolidated Group or otherwise have a

Material Adverse Effect upon the business properties, results of operations

or financial condition of any member of the Consolidated Group.



13.2

ACTION ON EVENT OF DEFAULT: In the case of any of the events described

in clause 13.1 shall have occurred and be continuing then, at once or at any

time thereafter (so long as any such event shall be continuing), the Agent may,

and upon the request of the Majority Lenders shall, by notice to the Borrowers'

Agent:

(a)



cancel the Total Commitments; and/or



(b)



declare all or part of the Total Outstandings to be immediately due and

payable whereupon they shall become so due and payable together with

accrued interest thereon and any other amounts then payable under this

Agreement, such payment to be effected on a date to be notified by the

Agent to the Borrowers' Agent; and/or



(c)



demand immediate

applies; and/or



(d)



place all or part of the Advance on demand, whereupon it shall immediately

become repayable on demand and at any time thereafter:

(i)



repayment



of any amounts to which



make any further amendment to the repayment

such Advance; and/or



paragraph



obligations



(b) above



relating to



(ii) demand repayment of all or part of the Advance placed on demand

together with accrued interest and any other amounts then payable

under this Agreement.

13.3

of an



NOTICE: If the Agent is notified under this Agreement of the occurrence

Event of Default it shall inform each of the Lenders.



- 35

13.4

SECURITY: The Borrowers hereby irrevocably agree with the Agent, the

Security Trustee and the Lenders that upon any enforcement of the rights

conferred upon the Security Trustee pursuant to the Share Pledges, the

Debentures, and any other Security Interest created in favour of the Security

Trustee, the liabilities satisfied as a result of such enforcement shall be

limited to the net amount distributed to the Lenders pursuant to clause 7.1

(Distribution) of the Security Trust Deed. The Borrowers further agree that as

security for the payment of the Borrowers' obligation to pay interest hereunder

the Borrowers will instruct TIL to pay to the Security Agent the amount of

$500,000 payable by TIL to the Borrowers under the Sale/Purchase Agreement dated

July 29, 1997 between Liberty and TIL for deposit by the Security Trustee in an

interest bearing deposit account for application to interest payments payable by

the Borrowers hereunder as and when due or, upon the occurrence of an Event of

Default, as otherwise provided in clause 7.1 of the Security Trust Deed.

INDEMNITIES

14.

the



Each Obligor shall

Security Trustee from



fully indemnify each of the Lenders, the Agent and

and against any expense, loss, damage or liability



(including without limitation "response costs" and "natural resource damages"

with respect to any Environmental Claims) which any of them may incur as a

consequence of the occurrence of

(a)



GENERAL INDEMNITY: any Event of Default, or any failure to draw down in

accordance with a Drawing Notice (other than as a result of any failure by

such indemnified party) or of any prepayment under this Agreement or

otherwise in connection with this Agreement. Without prejudice to its

generality, the foregoing indemnity shall extend to any interest, fees or

other sums whatsoever paid or payable on account of any funds borrowed in

order to carry any unpaid amount and to any loss (including loss of

profit), premium, penalty or expense which may be incurred in liquidating

or employing deposits from third parties acquired to make, maintain or fund

the Total Outstandings (or any part of them) or any other amount due or to

become due under this Agreement; and



(b)



ENVIRONMENTAL INDEMNITY: any of the following:

(i)



the breach of any representation or warranty of the Obligors made or

repeated in accordance with the terms of this Agreement -regarding

Substances or applicable Environmental Laws,



(ii) the failure of any Obligor to perform any obligation herein required

to be performed regarding Substances or applicable Environmental Laws,

(iii)any

and



applicable



Environmental



Law in effect



during the term hereof,



(iv) any act, omission, event or circumstance existing or occurring

(including without limitation the presence on or in any property or

release from any property or the generation on any property of any

Substance disposed of or otherwise released), resulting from or in

connection with the ownership, construction, occupancy, operation,

manufacture, sale, storage, distribution, use and/or maintenance of

its property regardless of whether the act, omission, event or

circumstance constituted a violation of any applicable Environmental

Law at the time of its existence or occurrence.

- 36

GUARANTEE

15.1

GUARANTEE: Each Guarantor as principal debtor and not merely as surety

unconditionally and irrevocably and jointly and severally guarantees to the

Agent, the Security Trustee and each of the Lenders payment by the Borrowers and

the Borrowers' Agent (in that capacity) of the Guaranteed Amounts in accordance

with the Financing Documents and unconditionally and irrevocably undertakes to

the Agent, the Security Trustee and each of the Lenders that if and each time

any Borrower does not make payment of any of the Guaranteed Amounts in

accordance with the Financing Documents, the Guarantors shall pay the amounts

not so paid upon first written demand by the Agent.

In this clause GUARANTEED AMOUNTS means any and all amounts whatsoever- which

the Financing Documents provide are to be paid by the Borrowers and the

Borrowers' Agent to the Lenders, the Agent and the Security Trustee (or any of

them) and references to the Guaranteed Amounts include references to any part of

them.

15.2

INDEMNITY: As a separate, additional, continuing and primary

obligation, each Guarantor unconditionally and irrevocably and jointly and

severally undertakes with the Agent, the Security Trustee and the Lenders (and

each of them) that, should the Guaranteed Amounts not be recoverable from the

Guarantor under clause 15.1 for any reason whatsoever (including, but without

prejudice to the generality of the foregoing, by reason of any other provision



of the Financing Documents being or becoming void, unenforceable or otherwise

invalid under any applicable law) then, notwithstanding that it may have been

known to the Agent, the Security Trustee or any of the Lenders, the Guarantor

shall upon first written demand by the Agent under clause 15.1, make payment of

the Guaranteed Amounts by way of a full indemnity in such manner as is provided

for in the Financing Documents and shall indemnify the Agent, the Security

Trustee and the Lenders (and each of them) against all losses, claims, costs,

charges and expenses to which they may be subject or which they may incur under

or in connection with the Financing Documents.

15.3

CONTINUING GUARANTEE: The above guarantees shall be continuing and

shall extend to the ultimate balance of the Guaranteed Amounts, regardless of

any intermediate payment or discharge in whole or in part. If any of the above

guarantees ceases to continue in force, the Agent, the Security Trustee and each

Lender may open a new account with or continue any existing account with the

Borrowers and the liability of the relevant Guarantor in respect of the

Guaranteed Amounts at the date of the cessation shall remain regardless of any

payments in or out of any such account.

15.4

DISCHARGE AND RELEASE: None of the Guarantors may terminate its

guarantee by notice to the Agent, the Security Trustee or any Lender or

otherwise. Subject to clause 15.5, and provided the Guaranteed Amounts have

been paid in full and the agreement has been canceled, terminated or expired and

the Lenders have no further Commitment hereunder, the Agent shall on behalf of

itself, the Security Trustee and the Lenders discharge or release the Guarantors

by written instrument signed by the Agent.

- 37

15.5

CLAWBACK: Any discharge or release referred to in clause 15.4, and any

composition or arrangement which any of the Guarantors may effect with the

Agent, the Security Trustee and any of the Lenders, shall be deemed to be made

subject to the condition that it will be void, if any payment or security which

the Agent, the Security Trustee and the Lenders (or any of them) may previously

have received or may thereafter receive from any person in respect of the

Guaranteed Amounts, is set aside, refunded or reduced, in whole or in part under

any applicable law or proves to have been for any reason invalid. If such

condition is satisfied, the Agent shall be entitled to recover from the

Guarantor on demand the value of such payment as if such discharge, release,

compromise or arrangement had not occurred.

15.6

WAIVER OF DEFENCES: The liabilities and obligations of each of the

Guarantors under this Agreement shall remain in force notwithstanding any act,

omission, neglect, event or matter whatsoever, except the proper and valid

payment of all the Guaranteed Amounts and without prejudice to its generality,

the foregoing shall apply in relation to anything which would have discharged

the Guarantors (wholly or in part) or which would have afforded the Guarantors

any legal or equitable defence, and in relation to any winding up,

reconstruction, reorganisation or dissolution of, or any change in constitution

or corporate identity or loss of corporate or partnership (as the case may be)

identity by, any of the Obligors, any partner of an Obligor, or any other person

and any incapacity or lack of corporate power or authority of any person.

Without prejudice to the generality of the foregoing none of the liabilities or

obligations of the Guarantors under this Agreement shall be impaired by the

Agent, the Security Trustee or the Lenders (or any of them):

(a)



agreeing with any Obligor any variation or departure (however substantial)

of or from any Financing Document and any such variation or departure

shall, whatever its nature, be binding upon each Guarantor in all

circumstances, notwithstanding that it may increase or otherwise affect the

liability of the Guarantors provided that if any variation which would

increase the liability of any Guarantor is made, without such Guarantor's

prior written consent the amount of such Guarantor's liability under this

clause shall be limited to the amount for which it would have been liable

had such variation not been made;



(b)



releasing or granting any time or any indulgence whatsoever to any Obligor

and, in particular, waiving any of the pre-conditions for the Advance under

this Agreement or any contravention by any Obligor of any of the Financing

Documents or entering into any transaction or arrangements whatsoever with

or in relation to any Obligor and/or any third party;



(c)



taking, accepting, varying, dealing with, enforcing, abstaining from

enforcing, surrendering or releasing any security for the Guaranteed

Amounts in such manner as it or they think fit; or



(d)



claiming, proving for, accepting or transferring any payment in respect of

the Guaranteed Amounts in any composition by, or winding up of, any Obligor

and/or any third party or abstaining from so claiming, proving, accepting

or transferring.



- 38

15.7

DEMANDS: Demands under this clause may be made from time to time, and

the liabilities and obligations of the Guarantors under this Agreement may be

enforced, irrespective of whether any demands, steps or proceedings are being or

have been made or taken against any of the Obligors and/or any third party

and/or any other Guarantor and each Guarantor waives diligence, presentment,

protest, demand for repayment and notice of default to or upon any Obligor.

15.8

SUSPENSE ACCOUNT: Until all amounts which may be or become payable by

the Borrowers hereunder or in connection herewith have been irrevocably paid and

discharged in full, the Agent, the Security Trustee and each Lender may:

(a)



refrain from applying or enforcing any other security, moneys or rights

held or received by the Agent, the Security Trustee or such Lender in

respect of such amounts or apply and enforce the same in such manner and

order as the Agent, the Security Trustee or such Lender sees fit (whether

against such amounts or otherwise) and none of the Guarantors shall be

entitled to the benefit of the same; and



(b)



hold in suspense account (subject to the accrual of interest thereon at

market rates for the account of the relevant Guarantor(s)) any moneys

received from any Guarantor or on account of that Guarantor's liability

hereunder.



15.9

SUBORDINATION:

Agreement:



So



long



as any Guarantor has any liability under this



(a)



the Guarantors shall not take or accept any Security Interest from any

other Obligor or, in relation to the Guaranteed Amounts, from any third

party, without first obtaining the Agent's written consent;



(b)



after the occurrence of an Event of Default, no Guarantor shall, without

first obtaining the Agent's written consent, seek to recover, whether

directly or by set-off, lien, counterclaim or otherwise, nor accept any

moneys or other property, nor exercise any rights, in respect of any sum

which may be or become due to the Guarantor on any account by any Borrower

or, in relation to the Guaranteed Amounts, from any third party, nor claim,

prove for or accept any payment in any composition by, or any winding up

of, any Borrower or, in relation to the Guaranteed Amounts, any third

party;



(c)



if, notwithstanding the foregoing, any Guarantor holds or receives any such

security, moneys or property, it shall forthwith pay or transfer the same

to the Agent. THE AGENT

- 39 -





16.1



APPOINTMENT



AS



AGENT



AND



ACKNOWLEDGEMENT:



Each



Lender irrevocably



authorises the Agent, to take such action on its behalf and to exercise and

carry out such powers, discretions, authorities and duties as are specifically

delegated to it by the Financing Documents and such powers as the Agent

reasonably considers are incidental thereto. The Agent shall have only those

powers, discretions, authorities and duties which are expressly specified in the

Financing Documents. From time to time, the Agent shall give such directions,

instructions or notices to the Security Trustee as directed by the Majority

Lenders. The Agent shall promptly notify the Security Trustee of any notice sent

to the Borrowers pursuant to clause 13.2.

16.2

RELATIONSHIP: In connection with its powers, discretions, authorities

and duties under the Financing Documents, the Agent:

(a)



shall act solely as the agent of each of the Lenders, and shall not assume,

and shall not be deemed to have assumed, any obligations to, or fiduciary

relationship with, the Lenders other than those for which specific

provision is made by the Financing Documents or any obligations to, or

fiduciary relationship with, any of the Obligors;



(b)



shall not be liable for any failure of any of the parties to this Agreement

duly and punctually to observe and perform any of its obligations under the

Financing Documents;



(c)



shall not be liable for any action taken or omitted

connection with the Financing Documents in good faith;



(d)



may act under the Financing Documents through its personnel and agents.

16.3 MAJORITY BANK DIRECTIONS: In the exercise of any power or discretion

given to the Agent under the Financing Documents and as to any matter not

expressly provided for in the Financing Documents or where a decision of

the Majority Lenders is provided for, the Agent shall act or refrain from

acting and shall give instructions to the Security Trustee in accordance

with the instructions of the Majority Lenders. In the absence of any such

instructions, the Agent may act or refrain from acting as it shall see fit.

Any such instructions of the Majority Lenders or any such decision of the

Agent shall be binding on all the Lenders and the Agent shall not be liable

to the Obligors, the Lenders or any of them for the consequences of any

such instructions or decision.



16.4

Lender



by it under or in



CREDIT APPROVAL: In favour of the Agent and the Security Trustee, each

acknowledges in connection with the Financing Documents:



(a)



that it has made such enquiries on its own behalf and taken such care as

would have been the case had its participation in the Facility been made

directly by that Lender to the Borrowers without the intervention of the

Agent or the Security Trustee and that it has not relied, and does not

rely, upon any information or advice provided, or any appraisal of, or

investigation into the financial condition, credit worthiness, affairs,

status or nature of the Consolidated Group effected by the Agent or the

Security Trustee in such capacity;



(b)



that, subject to clause 16.8, none of the Agent or the Security Trustee was

or will be obliged either before or at any time after the signing of this

Agreement to provide that Lender with any information or advice or to make

any such investigation or appraisal.

- 40 -





16.5

DOCUMENTATION: None

their respective directors,

(a)



of the Agent nor the Security Trustee nor any of

officers, employees or agents shall be liable:



for the execution, validity, enforceability or effectiveness of any of the

Financing Documents or any document delivered pursuant thereto or connected

therewith; or



(b)



16.6



for any statements, representations or warranties made or referred to in

any of the Financing Documents or any information given in connection with

any of the Financing Documents.

RELIANCE:



None



of the Agent nor the Security Trustee shall be liable:



(a)



for the consequences of relying on any communication or document believed

by it to be genuine and correct and to have been communicated or signed by

the person by whom it purports to be communicated or signed;



(b)



for the consequences of relying on any statement made by any director,

officer or employee of any person on any matter which may reasonably be

assumed to be within his knowledge or within his power to verify; or



(c)



for the consequences of relying on the advice of any professional

selected by it in connection with the Financing Documents.



16.7



DEFAULT:



The



Agent



shall



not



be



obliged



to



advisers



take:



(a)



any steps to ascertain whether any Event of Default or Potential Event of

Default has occurred and until the Agent has received express notice to the

contrary from the Borrowers' Agent or a Lender, it shall be entitled to

assume that no such event has occurred; or



(b)



any proceedings against the Obligors for the recovery of any sum due under

any of the Financing Documents or otherwise in connection therewith unless

it has been fully indemnified to its satisfaction by each of the Lenders in

the proportion which its Outstandings bear to the Total Outstandings (or,

if no Outstandings, its Commitment bears to the Total Commitments). The

Agent may not bring any action or proceedings in any court in the name of

any Lender without the prior written consent of such Lender (but for the

avoidance of doubt without prejudice to the ability of any other Lender or

the Security Trustee (or the Agent on behalf of any of the same) to bring

such action or proceeding).



16.8

(a)



INFORMATION:



The



Agent



shall:



send a copy of all notices served by the Borrowers' Agent under this

Agreement and of all other documents delivered to it under the Financing

Documents to each of the Lenders affected by such notice or document;



- 41

(b) not be obliged to transmit to the Lenders any information in any way

relating to any of the parties to the Financing Documents which the Agent

may have acquired otherwise than in its capacity as agent for the Lenders

in connection with this Agreement.

16.9



COMPLIANCE:



(a)



Each of the Agent and the Security Trustee may refrain from doing anything

which might, in its opinion, constitute a breach of any law or regulation

or be otherwise actionable at the suit of any person, and may do anything

which, in its opinion, is necessary or desirable to comply with any law or

regulation of any jurisdiction; and



(b)



without limiting paragraph (a) above, none of the Agent nor the Security

Trustee need disclose any information relating to any of the Obligors or

any of its related entities if the disclosure might, in its opinion,

constitute

a

breach

of any law or

regulation

or any duty of

confidentiality.



16.10

RESIGNATION: The Agent may at any time tender its resignation without

assigning any reason therefor and without being responsible for any costs

occasioned by such resignation. In that event, the Majority Lenders shall,



subject to the prior written consent of the Borrowers' Agent (such consent not

to be unreasonably withheld or delayed), appoint a Lender or any bank or

financial institution to act as Agent in its stead or, if no such person is so

appointed within 30 days of the Agent tendering its resignation, the Agent may,

in consultation with the Borrowers' Agent, appoint a Lender or any reputable

bank or financial institution so to act. Such resignation shall take effect

simultaneously with (and cannot take effect before) the appointment of the

successor Agent and thereupon:

(a)



the retiring Agent shall be discharged

the Finance Documents; and



from any further



obligation



under



(b)



the successor Agent and each of the other parties to this Agreement shall

have the same rights and obligations amongst themselves as they would have

had if the successor had been a party to this Agreement as agent for the

Lenders.



16.11

AGENCY DIVISION: In acting as Agent for the Lenders, the agency

division of the Agent shall be treated as a separate entity from any other of

its divisions or departments, and, notwithstanding the foregoing provisions of

this clause 16, in the event that the Agent should act for any of the Obligors

or any of their Subsidiaries in any capacity in relation to any other matter,

any information given by any such Obligor or Subsidiary to the Agent in such

other capacity may be treated as confidential by the Agent.

- 42

16.12

INDEMNITY: Each of Lenders shall fully indemnify the Agent and the

Security Trustee rateably in the proportion which its Outstandings bears to the

Total Outstandings (or if no Outstandings, its Commitment bears to the Total

Commitments), from and against any claims, proceedings, expenses, losses,

damages and liabilities of every description (except in respect of any agency

fee due to the Agent) which may be incurred by the Agent or the Security Trustee

in such capacity in good faith and which in any way relate to or arise out of

the Financing Documents or any related documents or any action taken or omitted

by the Agent or the Security Trustee in enforcing or preserving, or in

attempting to enforce or preserve, any of the rights of the Lenders under the

Financing Documents or any related documents.

16.13

AMENDMENTS: The Agent may (except where any other authority is

required for the same by the express provisions of the Financing Documents)

grant waivers or consents or vary the terms of this Agreement if authorised by

the Majority Lenders. Any such waiver, consent or variation so authorised and

effected by the Agent shall be binding on all the Lenders and the Agent shall be

under no liability whatsoever in respect of any such waiver, consent or

variation. This clause 16.13 shall not authorise, except with the prior consent

of all the Lenders:

(a)



any change in the rate at which interest or any fees are payable under this

Agreement;



(b)



any extension of the date for, or alteration in the amount or currency of,

any payment of principal, interest, fee, commission or any other amount

payable under the Financing Documents;



(c)



any increase in any Lender's Commitment;



(d)



any extension of the Availability Period; or



(e)



any variation of

(i)



the definition of Majority Lenders;



(ii) clause 4.3;



(iii) clause 10.2;

(iv) clause 18.2; or

(v)



this



clause



16.13;



or



any release of all or any part of the shares pledged to the Security

Trustee pursuant to the Share Pledges or the assets covered by the

Debentures. EXPENSES

17.1

EXPENSES: The Borrowers' Agent shall on demand from time to time pay,

in each case on the basis of a full indemnity to the Agent (for the account of

the Arrangers or the Agent):

- 43

(a) all costs and expenses (including legal and out-of-pocket expenses)

reasonably incurred in connection with the negotiation, preparation or

completion of the Financing Documents and any related documents; and

(b)



at such daily and/or hourly rates as the Agent shall from time to time

reasonably

determine,

all costs and expenses

(including,

without

limitation, telephone, fax, copying, travel, legal and personnel costs) in

connection with the Agent taking such action as it may deem appropriate, in

complying with any instructions from the Majority Lenders or any request by

the Borrowers' Agent in connection with:

(i)



the granting or proposed granting of any waiver or consent

of the Financing Documents;



(ii) any amendment

Documents;



or



proposed,



amendment



to



any



of



the



under any

Financing



(iii)any breach by any Obligor of any of its obligations under any of the

Financing Documents or any investigation as to whether any such breach

may have occurred;

(iv) the occurrence

Default;

(v)



of any



Potential



Event



of



Default



or an Event of



the review,

preservation

and/or

enforcement or the attempted

presentation or enforcement of any of the rights of the Agent, the.

Arrangers and the Lenders under the Financing Documents or any related

documents; and



(vi) the transfer

person.



or



possible



transfer



of the role of Agent to another



17.2

STAMP DUTY: The Obligors shall pay any stamp, documentary and other

similar duties and taxes to which this Agreement or any other Financing

Documents may be subject or give rise and shall fully indemnify the Agent, the

Security Trustee and each of the Lenders from and against any losses or

liabilities which any of them may incur as a result of any delay or omission by

the Obligors to pay any such duties or taxes.

17.3

VALUE ADDED TAX: The amounts stated in this Agreement to be payable by

the Obligors are exclusive of value added tax (VAT) and accordingly:

(a)



the Obligors shall pay on demand any VAT properly chargeable in respect of

supplies to the Obligors as contemplated by this Agreement (including any

VAT chargeable by the Agent and the Security Trustee in respect of its

supplies to the Obligors under this Agreement); and

- 44 -







(b)



in the case of goods or services supplied to or other costs, fees and

expenses incurred by the Agent, the Security Trustee or the Lenders in

connection with this Agreement and which are to be met by the Obligor or in

respect of which the Obligors are to indemnify the Lenders, the Security

Trustee or the Agent, the Obligors (for the avoidance of doubt) shall pay

to the Agent (for itself or the Lender or Lenders in question) or the

Security Trustee by way of additional remuneration such amount as shall

represent any associated VAT (whether charged by the supplier or suffered

by reason of the reverse charge provisions contained in Section 7 of the

Value Added Tax Act 1983 or analogous provisions under the laws of any

applicable jurisdiction).



SET-OFF



AND



PRO



RATA



SHARING



18.1

SET-OFF: Following an Event of Default, any Lender may without notice

to the Borrowers' Agent combine, consolidate or merge all or any of an Obligor's

accounts with, and liabilities to, that Lender and may set-off or transfer any

sum standing to the credit of any such accounts in or towards satisfaction of

any of the Obligor's liabilities to that Lender under the Financing Documents,

and may do so notwithstanding that the balances on such accounts and the

liabilities may not be expressed in the same currency and each Lender is hereby

authorised to effect any necessary conversions at the Bank's own rate of

exchange then prevailing.

18.2

PRO RATA SHARING: If a Lender receives or recovers any amount (other

than from the Agent) in respect of sums due from an Obligor under the Financing

Documents (whether by set-off or otherwise) it shall promptly notify the Agent

of such amount and the manner of its receipt or recovery and the following shall

apply:

(a)



the Agent shall,

as soon as

practicable,

having

regard to the

circumstances, consult with the Lenders to establish the aggregate amount

of sums received or recovered by the Lenders and what payments are

necessary amongst the Lenders for such aggregate amount to be divided

amongst the Lenders in proportion to their Outstandings or if there are no

Outstandings at such time, in proportion to their Commitments;



(b)



the Lenders shall promptly make such payments to each other, through the

Agent, as the Agent shall direct to effect the proportionate division

referred to in paragraph (a);



(c)



if a Lender makes a payment or payments pursuant to paragraph (b), any

payment previously received by that Lender shall, subject to paragraph (d),

be deemed to have been made by the Obligor, as the case may be, on the

understanding that it was received by that Lender as agent for the Lenders

and that the payments described in paragraph (b) would be made and the

liabilities of the Obligor to each of the Lenders shall accordingly be

determined on the basis that such payment or payments pursuant to paragraph

(b) would be made;



(d)



if a Lender makes a payment or payments pursuant to paragraph (b),

paragraph (c) shall not apply if, as a result, the indebtedness of the

Obligor to the Lender has been extinguished, discharged or satisfied by the

amount received or recovered (for example because of set-off). In this

event, for the purpose only of determining the liabilities of the Obligor

to the Lenders (other than the Lender making the said payment or payments)

and the liabilities of the Lenders to each other, the said payment or

payments by the Lender shall be deemed to have been made on behalf of the

Obligor in respect of its obligations under the Financing Documents and to

the extent the Facility is thereby discharged the Obligor, shall fully

indemnify the Lender for such payment or payments;

- 45 -





(e) any moneys



payable by the Obligor under



paragraph (d) by way of indemnity



shall be payable from the date the Lender makes the payment or payments

under paragraph (b), shall carry interest from such date and for such

purpose and all other purposes of this Agreement, be treated in the same

way as other amounts payable under this Agreement as though such moneys

were payable in respect of the Outstandings of the Lender which has the

benefit of the indemnity contained in paragraph (d) (whether or not the

indebtedness attributable to such participation has been extinguished,

discharged or satisfied in whole or in part); and

(f)



the parties shall make such payments and take such steps as may be just and

equitable to re-adjust the position of the parties if a Lender, having

followed the procedures required above, is required to return any sum

originally received or recovered by it in respect of sums due from an

Obligor (together with any interest accrued thereon).



ASSIGNMENTS



AND



TRANSFERS



19.1

TRANSFERS: Any Lender (the TRANSFEROR) may at any time transfer to any

other person (the TRANSFEREE) the whole or any part of its rights and/or

obligations hereunder by the delivery to the Agent of a certificate

substantially in the form of Schedule 4 (a TRANSFER CERTIFICATE), with the

approval of the Borrowers' Agent (such approval not to be unreasonably withheld

or delayed). A Lender which is proposing to transfer the whole or any part of

its rights and/or obligations hereunder shall give notice thereof to the Agent

which shall give notice thereof to the Borrowers' Agent in accordance with

clause 20.7. The Borrowers' Agent shall indicate as soon as possible whether it

approves (such approval not to be unreasonably withheld or delayed) of such

Transferee. If the Borrowers' Agent does not respond to such a notice within

twenty days then approval shall be deemed to be given and the Transferor shall

be entitled to deliver a Transfer Certificate to the Agent. Each Transfer

Certificate delivered to the Agent shall only be valid if it is in writing

signed by each of the Transferor and the Transferee and is contained in one

document or two counterparts. Each party to this Agreement (other than the

Transferor and the Transferee) irrevocably authorises the Agent to execute any

duly completed Transfer Certificate on its behalf. Any Transferee which is not a

party hereto shall further accede to the Security Trust Deed by delivery of a

supplemental trust deed in accordance with clause 2.2 of the Security Trust

Deed.

19.2

TRANSFER CERTIFICATES: Following receipt by the Agent of a Transfer

Certificate from each of a Transferor and a Transferee and with effect from the

date of the Transfer Certificate or any later date specified in the Transfer

Certificate:

(a)



the Transferor shall cease to be entitled to the rights and shall be

released from the obligations hereunder which are specified in the Transfer

Certificate; and



(b)



the Transferee shall become a party hereto as a Lender entitled to rights

and liable to observe obligations which differ from those referred to in

(a) only insofar as the Transferee is entitled thereto and liable in

respect thereof in place of the Transferor.



- 46

19.3

TRANSFEREES: Each Transferee shall, by its execution of a Transfer

Certificate, accept that none of the Agent or the Lenders is in any way

responsible for:

(a)



the accuracy and/or completeness

Transferee in connection herewith;



of



any



information



supplied



to the



(b)



the financial condition, creditworthiness, condition, affairs, status and

nature of any of the Obligors or the observance by any of the Obligors of

any of its obligations under this Agreement or any document relating



hereto; or

(c)



the legality, validity, effectiveness, adequacy or enforceability of this

Agreement or any document relating hereto and, save as otherwise expressly

provided herein, none of such parties shall, or shall be deemed to be, the

agent or trustee of such Transferee in connection herewith.



19.4

NO OBLIGATION:

Document to:



The



Transferor



shall not be obliged by any Financing



(a)



accept a re-transfer from the Transferee of any of the

obligations assigned or novated under this clause 19; or



rights



and/or



(b)



indemnify the Transferee for any losses arising by reason of any Obligor's

failure to perform its obligations under the Financing Documents or

otherwise.



19.5

DISCLOSURE OF INFORMATION: Each of the Agent, the Security Trustee and

each Lender agree to keep information obtained by it pursuant to the Financing

Documents confidential and agrees that it will only use such information in

connection with the transactions contemplated by the Financing Documents and not

to disclose any of such information other than (i) to its affiliates and

advisers, officers, employees, representatives and agents of itself and its

affiliates who are or are expected to be involved in the evaluation of such

information in connection with the transactions contemplated by the Financing

Documents or who otherwise have any need to know all or any part of such

information and who are advised of the confidential nature of such information,

(ii) to the extent such information presently is or hereafter becomes available

to it on a non-confidential basis from a source other than any Obligor or is or

comes into the public domain, (iii) to the extent used by it in preparation for

or in the conduct of any proceeding relating to the Financing Documents or the

transactions contemplated hereby and thereby, (iv) to the extent disclosure is

required by law, regulation or judicial order or requested or required by

regulators, examiners or auditors, (v) to any person providing credit to it or

to any rating agency in connection with the evaluation of its credit-worthiness

and who are advised of the confidential nature of, and agree to keep

confidential such information, or (vi) to transferees or sub-participants or

potential transferees or sub-participants who agree to be bound by the

provisions of this clause 19.5.

- 47

19.6

OBLIGORS: To the extent required by applicable law, the Obligors hereby

acknowledge and approve the terms of this clause 19 and any transfer effected

pursuant to this clause 19 and hereby beforehand give their permission or

co-operation to such transfer. To the extent that applicable law requires that

any Obligor be notified of a transfer effected pursuant to this clause 19, it is

hereby agreed that the relevant Transfer Certificate shall be sufficient for the

purposes of giving such notification and each Obligor hereby irrevocably

authorises and instructs the Agent to receive as agent on its behalf such

notification for such purpose but not otherwise.

19.7

FACILITY OFFICE: Any Lender may make its participation in any Advance

available from, and may receive the benefit of any payment due to it under this

Agreement at any of its Facility Offices. A Lender shall give the Agent prior

written notice of any change in any of its Facility Offices for the purposes of

this Agreement.

FURTHER



PROVISIONS



20.1

EVIDENCE

Agreement:

(a)



OF



INDEBTEDNESS:



In



any



proceedings



relating



to



a statement as to any amount due to the Lenders under this Agreement

is certified as being correct by an officer of the Agent; and



this

which



(b)



a statement as to any amount due to a Lender under this Agreement which is

certified as being correct by an officer of the Lender; shall, unless

otherwise provided in this Agreement, be prima facie evidence that such

amount is in fact due and payable.



20.2

APPLICATION OF MONEYS: If any sum paid or recovered in respect of the

liabilities of a Borrower under this Agreement is less than the amount then due,

the Agent may apply that sum to principal, interest, fees or any other amount

due under this Agreement in such proportions and order and generally in such

manner as the Agent shall determine.

20.3

RIGHTS CUMULATIVE, WAIVERS: The respective rights of the Agent and the

Lenders under this Agreement are cumulative, may be exercised as often as they

consider appropriate and are in addition to their respective rights under the

applicable law. The respective rights of the Agent, the Security Trustee and

the Lenders in relation to the Facility (whether arising under this Agreement or

under the applicable law) shall not be capable of being waived or varied

otherwise than by an express waiver or variation in writing; and in particular

any failure to exercise or any delay in exercising any of such rights shall not

operate as a waiver or variation of that or any other such right; any defective

or partial exercise of any of such rights shall not preclude any other or

further exercise of that or any other such right; and no act or course of

conduct or negotiation on their part or on their behalf shall in any way

preclude them from exercising any such right or constitute a suspension or any

variation of any such right.

20.4

ENGLISH LANGUAGE: All notices or communications under or in connection

with this Agreement shall be in the English language or, if in any other

language, accompanied by a translation into English. In the event of any

conflict between the English text and the text in any other language, the

English text shall prevail.

- 48

20.5

INVALIDITY OF ANY PROVISION: If any of the provisions of this Agreement

becomes invalid, illegal or unenforceable in any respect under any law, the

validity, legality and enforceability of the remaining provisions shall not in

any way be affected or impaired.

20.6

SEVERABILITY: Any provision of this Agreement which is prohibited or

unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective

to the extent of such prohibition or unenforceability without invalidating the

remaining provisions hereof, and any such prohibition or unenforceability in any

jurisdiction shall not invalidate or render unenforceable such provision in any

other jurisdiction. To the extent permitted by applicable law, each Obligor

hereby waives any provision of law which renders any provision of this Agreement

prohibited or unenforceable in any respect.

20.7

NOTICES: Any notice or communication under or in connection with this

Agreement shall be in writing and shall be delivered personally, or by post,

telex or fax to the addresses given in this Agreement or at such other address

as the recipient may have notified to the other parties in writing or in the

case only of communications by the Agent to Lenders, may be by SWIFT. Proof of

posting or despatch of any notice or communication to or by the Borrowers' Agent

shall be deemed to be proof of receipt:

(a)



in the case of a letter, on the third Business Day after posting;



(b)



in the case of a telex, and provided that the correct answer-back has been

received, immediately on actual receipt, or, if the time of such receipt is

not during normal working hours, then on the next working day in the place

of receipt;



(c)



in the case of a fax, when received, or, if the time of such receipt is not



during normal working

receipt; or

(d)



hours,



then on the next working day in the place of



in the case of transmission by SWIFT, when an acknowledgement of receipt by

SWIFT is received.



20.8

CHOICE OF LAW: This Agreement is governed by, and shall be construed in

accordance with, the laws of England.

20.9

Trustee

(a)



SUBMISSION TO JURISDICTION: For the benefit of the Agent, the Security

and each of the Lenders:



all the parties agree that the courts of England are, subject to paragraphs

(b) and (c) below, to have exclusive jurisdiction to settle any disputes

which may arise in connection with the legal relationships established by

this Agreement (including, without limitation, claims for set-off or

counterclaim) or otherwise arising in connection with this Agreement;



- 49

(b) the agreement contained in paragraph (a) above is included for the benefit

of the Agent, the Security Trustee and each of the Lenders. Accordingly,

notwithstanding the exclusive agreement in (a) above, the Agent, the

Security Trustee and each of the Lenders shall retain the right to bring

proceedings in any other court which has jurisdiction by virtue of the

Convention on Jurisdiction and the Enforcement of Judgments signed on 27

September 1968 (as from time to time amended and extended) or by virtue of

the Convention on Jurisdiction and the Enforcement of Judgments signed on

16 September 1988 (or from time to time amended and extended);

(c)



the Agent, the Security Trustee and each of the Lenders may in its absolute

discretion take proceedings in the courts of any other country which may

have jurisdiction, to whose jurisdiction each of the Obligors irrevocably

submits;



(d)



each Obligor irrevocably waives any objections on the ground of venue or

forum non conveniens or any similar grounds; and



(e)



each Obligor irrevocably consents to service of process by mail or in any

other manner permitted by the relevant law.



20.10

TRIAL BY JURY: Each of the Obligors, the Agent, the Security Trustee

and the Lenders hereby irrevocably waives all right to trial by jury in any

action, proceeding or counterclaim (whether based on contract, tort or

otherwise) arising out of or relating to any of the Financing Documents, the

Advance, or the actions of the Agent, the Security Trustee or any Lender in the

negotiation, administration, performance or enforcement thereof.

20.11

AGENT FOR SERVICE OF PROCESS: Each of the Obligors shall at all times

maintain an agent for service of process and any other documents in proceedings

in England or any other proceedings in connection with this Agreement. Such

agent shall be Law Debenture Corporate Services Limited, the address of which on

the date hereof is Princes House, 95 Gresham Street, London EC2V 7LY, England

and any writ, judgment or other notice of legal process shall be sufficiently

served on the Obligors if delivered to such agent at its address for the time

being. The Obligors undertake not to revoke the authority of the above agent

and if, for any reason, the Agent requests any of the Obligors to do so such

Obligor shall promptly appoint another such agent with an address in England and

advise the Agent thereof. If following such a request such Obligor fails to

appoint another agent, the Agent shall be entitled to appoint one on behalf of

the Obligors.

20.12

COUNTERPARTS: This Agreement may be executed in any number of

counterparts and by the different parties hereto on separate counterparts, each

of which when so executed and delivered shall be an original but all the



counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date

first above written.

- 50

SCHEDULE 1

LENDER



COMMITMENT



CREDIT



SUISSE



FIRST



BOSTON



Credit Suisse First

Bleicherweg 10

P.O. Box 900

CH-8070 Z rich

Switzerland



Boston



Address for

Attention:

Telephone:

Fax:



Notices:



US$



30,702,500



As Above

Mr. Thomas Patrick

41 1 333 7618

41 1 333 7620

- 51 -





SCHEDULE 2

FORM OF DRAWING NOTICE

Date: *____ 19*__

Dear



Sirs,



Facility



Agreement



dated



July



2,



1998



1. We refer to clause 5 of the Facility Agreement. Terms defined in the Facility

Agreement have the same meanings in this Drawing Notice.

2.



We wish to borrow the Advances with the following specifications:



(a)



Borrowers: Abacan Resource Corporation, Dahomey Resource Corporation and

Liberty Technical Services Limited, jointly and severally;



(b)



Drawing Date: July 2, 1998-



(c)



Amount: $30,702,484



(d)



Interest Period: successive interest periods of three-months



(e)



Payment Instructions: Pay to the account designated by Total International

Limited against written confirmation that such payment is received in

satisfaction of all amounts outstanding under the Prepayment Agreement and

Guarantees referred to in Clause 2.2 of the Facility Agreement.



3.



We confirm that the matters represented and warranted by each Obligor set

out in clause 11.2 of the Facility Agreement are true and accurate on the

date of this Drawing Notice as if made with reference to the facts and

circumstances now prevailing and that no Event of Default or Potential

Event of Default has occurred and is continuing or would result from the

Advance. Yours faithfully,



ABACAN



RESOURCE



CORPORATION



- 52



For and on behalf of

Abacan Resource Corporation,

as Borrower's Agent



[Seal]



By: ____________________

Director



By: ____________________

Director



For and on behalf of

Abacan Resource Corporation,

as Borrower



[Seal]



By: ____________________

Director



By: ____________________

Director



- 53

For and on behalf of

Dahomey Resource Corporation,

as Borrower



By:



____________________

Director



By:



____________________

Director



For and on behalf of

Liberty Technical Services

as Borrower



By:



____________________

Director



[Seal]



Limited,



[Seal]



By:



____________________

Director

- 54 -





SCHEDULE 3

PART I

FORM OF CERTIFICATE OF BORROWER

[Letterhead of Borrower]

To:



Credit



Suisse



First



Boston



as



Agent



We [*name] and [*name], both Directors of [*name of Borrower] of [*address] (the

Company)

HEREBY



CERTIFY



that:



(a)



attached hereto marked "A", are true and correct copies of all documents

which contain or establish or relate to the constitution of the [Company];



(b)



attached hereto marked "B", is a true and correct copy of resolutions duly

passed at a meeting of the shareholders of the Company duly convened and

held on July ___, 1998 authorising the Company to:

(i)



borrow at any time up to $30,702,500

pursuant to the Facility Agreement;



at a variable



rate of interest



(ii) guarantee the performance by all other Obligors of their

obligations under the Financing Documents;



respective



(iii) sign, deliver and perform the Facility Agreement;

(c)



attached hereto marked "C", is a true and correct copy of resolutions duly

passed at a meeting of the Board of Directors of the Company duly convened

and held on July ___, 1998 approving the Facility Agreement and authorising

its signature, delivery and performance and such resolutions have not been

amended, modified or revoked and are in, full force and effect;



(d)



attached hereto marked "D", is a true and correct copy of the acceptance by

the agents in England of their appointment as agent of the Company for the

purpose of accepting service of process.



Does



not



apply



to



Abacan



Resource



Corporation



- 55

The following signatures are the true signatures of the persons who have been

authorised to sign the Facility Agreement and to give notices and

communications, including notices of drawing, under or in connection with the

Facility Agreement.

Name

*

*

*

Signed:



Position

*

*

*



Signature



Director

Date:



Director



*________



19*_____



1, [*name], the Secretary of [*name of Borrower] (the Company) hereby certify

that [*names of two Directors] giving above certificate] are duly appointed

Directors of the Company and that the signature of each of them above is his

signature.

Signed:

Secretary

Date:



*______



19*_____

- 56 -





PART II

FORM OF CERTIFICATE OF GUARANTOR

To:



Credit



We [*name] and

(the COMPANY)

HEREBY



CERTIFY



Suisse



[Letterhead of Guarantor]

First Boston



[*name],



both Directors of [*name of Guarantor] of [*address]



that:



(a)



attached hereto marked "A", are true and correct copies of all documents

which contain or establish or relate to the constitution of the Company;



(b)



attached hereto marked "B", is a true and correct copy of resolutions duly

passed at a meeting of the shareholders of the Company duly convened and

held on July ___, 1998 authorising the Company to:

(i)



guarantee the performance by all other obligors of their

obligations under the Financing Documents; and



respective



(ii) sign, deliver and perform the Facility Agreement; and

(c)



attached hereto marked "C", is a true and correct copy of resolutions duly

passed at a meeting of the Board of Directors of the Company duly convened

and held on July ___, 1998 approving the Facility Agreement and authorising

its signature, delivery and performance and such resolutions have not been

amended, modified or revoked and are in full force and effect;



(d)



attached hereto marked "D", are true and correct copies of the acceptance

by the agent in England of their appointments as agent of the Company for

the purpose of accepting service of process.



The following

authorised to

communications



signatures are the true signatures of the persons who have been

sign the Facility Agreement and to give any notices and

under or in connection with the Facility Agreement.

- 57 -





Name

*

*

*

Signed:

Director



Position

*

*

*

Director



Signature



Date:



*______



_____



19*__



1, [*name], the Secretary of [*name of Borrower] (the Company) hereby certify

that [*names of two Directors giving above certificate] are duly appointed

Directors of the Company and that the signature of each of them above is his

signature.

Signed:

Secretary

Date:



*_____



_____



19*-__

- 58 -





PART III

CERTIFICATE OF ARC DIRECTORS

To:

dated



Credit Suisse First Boston, as Agent under the Credit Facility Agreement

________, 1998.



Date:

The undersigned directors hereby certify as follows according to our best

knowledge, information and belief (having made due enquiry) that as of the date

of this certificate.

1.

All Subsidiaries of any Obligor (as such terms are defined in the Credit

Facility Agreement) are Guarantors under the Credit Facility Agreement (except

such Subsidiaries as have been notified to the Agent in writing and as to which

the Agent has not requested that they accede to the Credit Facility Agreement as

Guarantors).

2.

No Obligor is a party to any Oil and Gas Agreement except the agreements

listed on the schedule attached hereto.

3.

The attached schedule includes a complete and correct list of all Current

Liabilities and Current Assets of each Obligor.

4.

No Obligor has any legal or beneficial interest in any Oil and Gas

Property other than the properties described in the Joint Venture Documents and

the Oil and Gas Properties described in the attached Schedule.

5.

No Obligor has filed or has had filed against it any petition under any

bankruptcy or other proceeding under any analogous law.

6.

No Obligor is a party to any legal action or litigation other than the

matters described on the attached schedule, and no judgement or attachment has

been made or granted against any Obligor or its assets except as shown on the

attached schedule.

7.

Except as described in the attached schedule no Obligor has received any

notice of default and is not in default under any Joint Venture Document or Oil

and Gas Agreement.

8.

No

(as such

Permitted



Obligor has granted or has committed to grant any Security Interest

term is defined in the Credit Facility Agreement) other than a

Security Interest.



_____________________



_____________________

- 59 -





SCHEDULE 4

FORM OF TRANSFER CERTIFICATE

To:



Credit



Suisse



First



Boston

TRANSFER CERTIFICATE



relating to a Credit Facility Agreement (the FACILITY AGREEMENT) dated ______

1998 and made between the Borrowers and Guarantors named therein, Credit Suisse

First Boston as Agent, Credit Suisse First Boston as Security Trustee, and

certain Lenders named therein. Terms defined in the Facility Agreement have the

same meanings herein.

1.



[Transferor]



(the



LENDER):



(a)



confirms that to the extent that details appear in the Schedule hereto

against, as the case may be, the heading LENDER'S COMMITMENT and/or

LENDER'S PARTICIPATION, such details accurately summarise, as the case may

be, its participation in the Facility (as defined in the Facility

Agreement); and



(b)



requests [Transferee Lender] (the TRANSFEREE) to accept and procure the

transfer to the Transferee of the portion specified in the Schedule of, as

the case may be, its participation in the Facility by counter-signing and

delivering this Transfer Certificate to the Agent at its address for the

service of notices specified in the Facility Agreement.



2.

The Transferee hereby requests the Agent to accept this Transfer

Certificate as being delivered to the Agent pursuant to and for the purposes of

clause 19 of the Facility Agreement so as to take effect in accordance with the

terms thereof on [date of transfer].

3.

The Transferee confirms that it has received a copy of the Facility

Agreement together with such other documents and information as it has required

in connection with this transaction and that it has not relied and will not

hereafter rely on the Lender to check or enquire on its behalf into the

execution, validity, enforceability, effectiveness, adequacy, accuracy or

completeness of any such documents or information and further agrees that it has

not relied and will not rely on the Lender to assess or keep under review on its

behalf the financial condition, creditworthiness, condition, affairs, status or

nature of any of the Obligors or of any other party to any of the Financing

Documents.

4.

The Transferee hereby undertakes with the Lender and each of the other

parties to the Facility Agreement that it will perform in accordance with their

terms all those obligations which by the terms of the Facility Agreement will be

assumed by it after delivery of this Transfer Certificate to the Agent and

satisfaction of the conditions (if any) subject to which this Transfer

Certificate is expressed to take effect.

- 60

5.

The Lender makes no representation or warranty and assumes no

responsibility with respect to the legality, validity, effectiveness, adequacy

or enforceability of the Facility Agreement or any document relating thereto and

assumes no responsibility for the financial condition of any of the Obligors or

any other party to the Financing Documents or for the performance and observance

by any of the Obligors or any other such party of any of its obligations under

the Financing Documents or any document relating thereto and any and all such

conditions and warranties, whether express or implied by law or otherwise, are

hereby excluded.

6.



This



Transfer



Certificate and the rights and obligations of the parties



hereunder



shall



be



governed



by and construed in accordance with English law.

THE SCHEDULE



LENDER'S COMMITMENT

*______ ______ _______

LENDER'S PARTICIPATION

*_____ ______ _______

AMOUNT

*_____ _____ ________

TERM

*____ _____ ________

PORTION TRANSFERRED

*______ _____ ______

*Transferor



[*Transferee]

Address: *

Telex: *

Fax: *

Signed



Signed

Credit Suisse

as Agent:

Signed .

Dated *______



First



Boston,



___19*___

- 61 -





SCHEDULE 5

FORM OF GUARANTOR ACCESSION DEED

To:



Credit



From:



Suisse



[*Proposed



First



Boston,



additional



as



Agent



Guarantor].



Date: *____ _____ 19*___

1.

We refer to an agreement (the Facility Agreement) dated ______ 1998 and

made between the Borrowers and Guarantors named therein, Credit Suisse First

Boston as Agent, Credit Suisse First Boston as Security Trustee and the Lenders

as referred to therein. Terms defined in the Facility Agreement shall bear the

same meanings herein.

2.

We [name of the company] of [Registered Office] (Registered no. *____

____) agree to become a Guarantor under the Facility Agreement and to be bound

by the terms of the Facility Agreement as Guarantor.

3.

*

4.



Our address for

______ ________

This



Deed



is



notices is:

_________



governed



EXECUTED as a DEED by

[PROPOSED GUARANTOR]

[acting by two directors/a

and the secretary]



by



English



law.

)

)

)

)



director



Director

Director/Secretary

SIGNED by

for and on behalf of

in the presence of:



[Borrowers'



Agent]



)

)

)



- 62

SCHEDULE 6

THE ORIGINAL GUARANTORS

ABACAN



WEST



RESOURCES



AFRICA



RESOURCE



AGBARA



RESOURCES



ABACAN



POWER



ABACAN-ADDAX

ANGUS

PROFILE



(BENIN)



LIMITED,



whose



registered



office



is



at:



CORPORATION,



whose



registered



office



is



at:



LIMITED,



(BENIN)

BENIN



whose



LIMITED,



registered

whose



office



registered



is



at:



office



is



at:



CONSORTIUM



S.A.,



whose



registered



office



is



at:



RESOURCES



LTD.,



whose



registered



office



is



at:



INTERNATIONAL

INTERNATIONAL



LTD.,



whose



registered



office



is



at:



- 63

SCHEDULE 7

[FORM OF MOPU AGREEMENT]

[Intentionally excluded as Mopu Agreement is not an Agreement

to which the Company is a party]

- 64

SCHEDULE 8

The purpose of this document is to set forth the terms and conditions of the

transaction entered into between

CREDIT SUISSE FIRST BOSTON, ZURICH ("Party A")

And

ABACAN RESOURCES CORP, TORONTO ("Party B")

(collectively, the "Parties")

on



the



Trade



Date



specified



below



(the



"Transaction").



The definitions and provisions contained in the 1991 ISDA Definitions (the "1991

Definitions") and the 1996 ISDA Equity Derivatives Definitions (the "1996

Definitions") both as published by the International Swap and Derivatives

Association, Inc. are incorporated by reference into this Confirmation. In the

event of any inconsistency between the Definitions and this Confirmation, this

Confirmation will govern.

The Parties hereby agree to enter into the Transaction as a condition precedent

to the on-going restructuring of an existing loan facility between CSFB Zurich

and a subsidiary of Party B.



1.

The terms of the

relates are as follows:

GENERAL

Trade



particular



Transaction



to



which this Confirmation



TERMS:

Date:



26



July



Option



Style:



European



Option



Type:



Call



1998



Seller:



Party



B



Buyer:



Party



A



Shares:



ABACAN RESOURCE CORP REGISTERED

ISIN CODE: CA 002 919 108 1

SECURITY NO: 346 665



SHARES



- 65

Number



of



Option



Entitlement:



1



Strike



Price:



CAD



Options:



500,000

Share



per



Option



0.91



Premium:



ZERO



Seller Business Day:



Any day on which commercial banks are open for

Business (including dealings in foreign exchange

and foreign currency deposits) in Toronto.



Currency Business Day:



Any day on which commercial banks are open for

Business (including dealings in foreign exchange

and foreign currency deposits) in the principal

financial centre for the relevant currency.



Exchange:



Toronto Stock Exchange, or any successor to such

exchange or quotation system. If the exchange

ceases to list or otherwise to include the

Shares the parties will negotiate in good faith

to agree on another exchange or quotation

system.



Clearance System:



Cedel, or any successor to or transferee of such

Clearance System. If the Clearance System ceases

to clear the Shares, the parties will negotiate

in good faith to agree on another manner of

delivery.



PROCEDURE



FOR



EXERCISE:



Expiration



Time:



Close of business

Expiration Date



Expiration



Date:



26 July 2000 or, if that date is not an Exchange

Business Day, the first following day that is an

Exchange Business Day.



Automatic



Exercise:



Seller's Contact Details

for Purpose of Giving Notice:



Applicable

Mr.



on



the



Exchange



on



the



Telephone Number:

Fax Number:

- 66

VALUATION:

Valuation



Time:



At



the



Close



of



trading



on



the



Exchange



Valuation Dates:



The last 15 Exchange Business Days before and

including the Expiration Date



Averaging Dates:



Each Valuation Date



Averaging Market Disruption:



Modified Postponement



SETTLEMENT

Cash



TERMS:



Settlement:



Relevant



Applicable



Price:



Bid / Offer / Mid-Market / Last traded

share as quoted by the Exchange



Cash Settlement Payment Date:



price per



Two / Three Currency Business Days after the last

Valuation Date



ADJUSTMENTS:

Method



of



Adjustment:



EXTRAORDINARY



Calculation



Agent



Adjustment



EVENTS:



Consequences of Merger Events:

a.

b.

c.



Share-for-Share:

Share-for-Other:

Share-for-Combined:



Alternative Obligation

Cancellation and Payment

Cancellation and Payment



NATIONALIZATION OR INSOLVENCY: Cancellation



and



Payment



- 67

3.

Calculation



4.



Account



5.



Governing



Agent:



Details:



Law:



Party A whose determinations and calculations

will be binding and conclusive in the absence of

manifest error. The Calculation Agent will have

no responsibility for good faith errors or

omissions in making any determination as provided

herein.

CREDIT SUISSE FIRST BOSTON, TORONTO in favour of

CREDIT SUISSE FIRST BOSTON, ZURICH, a/c

T1000000.01.CAD.

English



Law



Please confirm that the foregoing correctly sets forth the terms of our

agreement by executing the copy of this Confirmation enclosed for that purpose

and returning it to us marked for the attention of:

CREDIT SUISSE FIRST BOSTON

Attn. Mr. Walter Bachmann /

P.O. Box 900

8070 Zurich

Switzerland



FMLS



32



In the case of any queries

- - regarding the transaction, please contact Mr Thomas Patrick phone: 01- 333 76

18,

- - regarding settlement, please contact Mr Heiko Zimmermann phone: 01 - 333 64 95

or

- - regarding documentation, please contact Mr Walter Bachmann phone: 01 - 333 87

77.



It has been

co-operation.



CREDIT



SUISSE



a



pleasure



FIRST



being



of



service



to you and we thank you for your



BOSTON



NAME

Title



THOMAS

Title



PATRICK



- 68

Confirmed

For



and



ABACAN



as

on



of



the



behalf



RESOURCES



date



first



above



written:



of



CORP,



TORONTO



YYYYYYYYY

- 69

SIGNING SCHEDULE

BORROWERS:

ABACAN RESOURCE CORPORATION,

as a Deed

By:

[J. Harvie



]



Signature:



/s/ James Harvie

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



By



]



Signature:



/s/Wade Cherwayko

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



[W.G.Cherwayko



DAHOMEY RESOURCE

As a Deed



CORPORATION



By:



[W.G.



Cherwayko



]



Signature:



/s/ Wade Cherwayko

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



By:



[T.B.



Folawayo



]



Signature:



/s/ Tunde Folawiyo

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



]



Signature:



/s/ Wade Cherwayko

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



]



Signature:



/s/ Tunde Folawiyo

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



LIBERTY TECHNICAL SERVICES

As a Deed

By:

[W.G. Cherwayko

By:



[T.B.



LIMITED



Folawayo



- 70

ORIGINAL



GUARANTORS:



ABACAN



RESOURCES



By:



[W.G.



Cherwayko



]



Signature:



/s/ Wade Cherwayko

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



By:



[T.B.



Folawayo



]



Signature:



/s/ Tunde Folawiyo

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



AFRICAN



RESOURCE



WEST



(BENIN)



LIMITED



CORPORATION



By:



[W.G.



Cherwayko



]



Signature:



/s/ Wade Cherwayko

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



By:



[T.B.



Folawayo



]



Signature:



/s/ Tunde Folawiyo

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



AGBARA



RESOURCES



By:



[W.G.



Cherwayko



]



Signature:



/s/ Wade Cherwayko

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



By:



[T.B.



Folawayo



]



Signature:



/s/ Tunde Folawiyo

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



ABACAN



POWER



(BENIN)



By:



[W.G.



Cherwayko



]



Signature:



/s/ Wade Cherwayko

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



By:



[T.B.



Folawayo



]



Signature:



/s/ Tunde Folawiyo

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



LIMITED



LIMITED



- 71

ABACAN-ADDAX



BENIN



CONSORTIUM



S.A.



By:



[W.G.



Cherwayko



]



Signature:



/s/ Wade Cherwayko

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



By:



[T.B.



Folawayo



]



Signature:



/s/ Tunde Folawiyo

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



Signature:



/s/ Wade Cherwayko

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



ANGUS

By:



INTERNATIONAL

[W.G.



RESOURCES



Cherwayko



LTD.

]



By:



[T.B.



PROFILE



Folawayo



INTERNATIONAL



]



Signature:



/s/ Tunde Folawiyo

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



LTD.



By:



[W.G.



Cherwayko



]



Signature:



/s/ Wade Cherwayko

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



By:



[T.B.



Folawayo



]



Signature:



/s/ Tunde Folawiyo

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



]



Signature:



/s/ Tom Patrick

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



]



Signature:



/s/ Alex Gantner

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



]



Signature:



/s/ Tom Patrick

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



]



Signature:/s/ Alex Gantner

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



- 72

LENDERS:

CREDIT SUISSE

As Lender

By:



[T.



By:



[Alex



AGENT



AND



FIRST



BOSTON



Patrick

Gantner



SECURITY



CREDIT SUISSE

As Agent and

By:



[Tom



By:



[Alex



TRUSTEE:



FIRST BOSTON,

Security Trustee

Patrick

Gantner



- 72







EX-10.9

14



EXHIBIT



10.9



ABACAN RESOURCE CORPORATION and DAHOMEY RESOURCE CORPORATION and

LIBERTY

TECHNICAL SERVICES LTD. and ABACAN RESOURCES (BENIN) LIMITED and WEST AFRICAN

RESOURCE CORPORATION and AGBARA RESOURCES LIMITED and ABACAN POWER (BENIN)

LIMITED and ABACAN-ADDAX BENIN CONSORTIUM S.A. and ABACAN RESOURCES (NIGERIA)

LTD. and ANGUS INTERNATIONAL RESOURCES LTD. and PROFILE INTERNATIONAL LTD.

And

CREDIT SUISSE FIRST BOSTON

(as Agent)

CREDIT SUISSE FIRST BOSTON

(as Security Trustee)

and



THE LENDERS herein referred to

SECURITY TRUST DEED

Dated July 2, 1998



SECURITY



TRUST



DEED



(the



AAGREEMENT@)



made



on



July



2,



1998



BETWEEN

ABACAN RESOURCE CORPORATION, an Alberta, Canada corporation, whose registered

office is at Suite 1600, 407 Second Street S.W., Calgary, Alberta, Canada

(sometimes referred to individually herein as AARC@); DAHOMEY RESOURCE

CORPORATION, a Bahamas limited company, whose registered office is at Chambers,

Suite 304, Beaumont House, Bay Street, P.O. Box CB-11986, Nassau, The Bahamas

(sometimes referred to individually herein as ADAHOMEY@); LIBERTY TECHNICAL

SERVICES LTD., a Bahamas limited company, whose registered office is at 38

Warehouse Road, Apapa, Lagos, Nigeria (sometimes referred to individually herein

as ALiberty@); ABACAN RESOURCES (BENIN) LIMITED, whose registered office is at

Chambers, Suite 304, Beaumont House, Bay Street, P.O. Box CB 11986, Nassau,

N.P., The Bahamas; WEST AFRICAN RESOURCE CORPORATION, a Bahamas limited company,

whose registered office is at Chambers, Suite 304, Beaumont House, Bay Street,

P.O. Box CB 11986, Nassau, N.P., The Bahamas; AGBARA RESOURCES LIMITED, a

Bahamas limited company, whose registered office is at Chambers, Suite 304,

Beaumont House, Bay Street, P.O. Box CB 11986, Nassau, N.P., The Bahamas; ABACAN

POWER (BENIN) LIMITED, a Bahamas limited company, whose registered office is at

Chambers, Suite 304, Beaumont House, Bay Street, P.O. Box CB 11986, Nassau,

N.P., The Bahamas; ABACAN-ADDAX BENIN CONSORTIUM S.A., a Benin limited company,

whose registered office is at Villas de la Francophonie, Fadoul 1 08 B.P. 0428,

Cotonou, Benin; ABACAN RESOURCES (NIGERIA) LTD., a Nigerian limited company,

whose registered office is at 38 Warehouse Road, Apapa, Lagos, Nigeria; ANGUS

INTERNATIONAL RESOURCES LTD., a Bahamas limited company, whose registered office

is at Chambers, Suite 304, Beaumont House, Bay Street, P.O. Box CB-11986,

Nassau, The Bahamas; and PROFILE INTERNATIONAL LTD., a Bahamas limited company,

whose registered office is at Chambers, Suite 304, Beaumont House, Bay Street,

P.O. Box CB-11986, Nassau, The Bahamas.

(individually and collectively, the AOBLIGORS@);

CREDIT



SUISSE



FIRST



BOSTON



(as



AGENT);



CREDIT



SUISSE



FIRST



BOSTON



(as



SECURITY



THE



LENDERS



listed



on



the



execution



TRUSTEE);



pages



of



this



Deed.



WHEREAS:

(A)

The Lenders have agreed to make available to the ARC, Liberty and

Dahomey as Borrowers the Facility (each as defined in the Facility Agreement)

upon the terms and conditions of the Facility Agreement (as defined below).

(B)

The Security Trustee has agreed to act as Security Trustee of this Deed

and to hold the benefit of the Security Documents (as defined below) and the

security thereby created on trust for the Beneficiaries (as defined below).

-2

(C)

Pursuant to the provisions of the Facility Agreement, as a condition

precedent to the Facility becoming available, the Obligors are required to

execute the Security Documents (as defined below) in favour of the Security

Trustee to be held by it on trust for the Beneficiaries (as defined below) in

accordance with the terms and conditions of this Deed.



NOW



IT



IS



HEREBY



AGREED



as



follows:-



INTERPRETATION

1.1

DEFINITIONS: In this Deed (including the recitals) words and expressions

defined in the Facility Agreement shall bear the same respective meanings when

used herein, unless otherwise defined herein or the context otherwise requires.

The following words and expressions have, except where the context otherwise

requires, the meanings respectively shown opposite them:

BENEFICIARIES means the Agent, the Security Trustee and the Lenders;

THIS DEED means this deed as amended or modified from time to time, including

any other deed or instrument expressed to be supplemental hereto;

ENFORCEMENT NOTICE means a notice from the Agent to the Security Trustee stating

that the Agent has issued a notice to the Borrowers' Agent pursuant to clause

13.2 of the Facility Agreement;

FACILITY AGREEMENT means the $30,702,500 Credit Facility Agreement dated of even

date herewith between Abacan Resource Corporation, Liberty Technical Services

Limited and Dahomey Resource Corporation as the Borrowers, the Guarantors

therein referred to, Credit Suisse First Boston as Agent and as Security Trustee

and the Lenders therein referred to as the same may be amended from time to

time;

PROCEEDS means all moneys and other property held or received by the Security

Trustee or any Receiver under any of the Security Documents and the proceeds of

realisation of the Secured Property;

RECEIVER means any person or persons appointed (and any additional person or

persons appointed or substituted) as receiver, administrative receiver, receiver

and manager, manager or similar insolvency officer appointed by the Security

Trustee pursuant to any of the Security Documents;

SECURED AMOUNTS means all moneys and liabilities (including without limitation

amounts payable under this Deed) whatsoever which may be due, owing or payable

by the Obligors to the Beneficiaries in any currency, as principal or as surety,

individually or jointly, on any account whatsoever pursuant to the Financing

Documents or as a consequence of any breach, non-performance, disclaimer or

repudiation by the Obligors of any of their obligations under the Financing

Documents and "Secured Amounts" shall have a like meaning with respect to a

particular Security Document or Beneficiary;

SECURITY DOCUMENTS means this Deed, the Debentures, the Share Pledges, the MOPU

Agreement, the Amni Guarantee, and any other mortgages, charges, assignments or

other security interests from time to time granted by the Obligors to the

Security Trustee pursuant to the Financing Documents.

-3

SECURED

1.2



PROPERTY



means



the



property



described



in



clause



2.1;



CONSTRUCTION: In this Deed, except where the context otherwise requires:



(a)



Headings and the table of contents are for ease of reference only;



(b)



references to clauses, sub-clauses, paragraphs or the Schedule are, unless

otherwise specified, to be construed as references to clauses, sub-clauses

and paragraphs of and the Schedule to this Deed;



(c)



a provision

re-enacted;



(d)



references to documents include any deed (including this Deed), negotiable

instrument,

certificate, notice or other document of any kind and



of law



is a



reference



to



that



provision



as



amended



or



references to any document (or a provision thereof) shall be construed as a

reference to that document or provision as from time to time amended,

supplemented, varied or replaced (in whole or in part);

(e)



references to any party hereto or any person include references

successor or assignee of such party or other person; and



to any



(f)



unless the context otherwise requires, words denoting the singular number

shall include the plural and vice versa. DECLARATION OF TRUST; GENERAL



2.1

TRUST: The Security Trustee shall stand possessed of and shall hold all

the covenants, undertakings, charges, assignments and other security interests

made, given or to be made or given under or pursuant to any of the Security

Documents, upon trust for the Beneficiaries rateably in proportion to their

respective Secured Amounts.

2.2

ADDITIONAL BENEFICIARIES: Upon the delivery to the Security Trustee by

the Agent of a supplemental deed substantially in the form of Schedule 1

executed by an Obligor and by any person intended to become a beneficiary

hereunder, such person shall thereafter be entitled to the benefit of and

subject to the provisions of this Deed as a Beneficiary. Each Obligor party

hereto agrees that it will promptly execute such a Deed upon request by the

Agent.

2.3

AGENT: Notwithstanding anything to the contrary in the Facility

Agreement, the Security Trustee shall be entitled to assume that the interests

of each Bank are represented by the Agent. The Security Trustee shall not be

obliged or required to act in accordance with the directions of any of the

Lenders given otherwise than through the Agent.

2.4

SECURITY TRUSTEE'S NOTIFICATION: The Security Trustee shall promptly

advise the Agent of any breach of the provisions of this Deed which comes to the

notice of the Security Trustee.

-4

2.5

JURISDICTION: It is hereby declared and agreed that, in relation to any

jurisdiction the courts of which would not recognise or give effect to the trust

expressed to be created by this Deed, the relationship of the Beneficiaries to

the Security Trustee shall be construed as one of principal and agent but, to

the extent permissible under the laws of such jurisdiction, all the other

provisions of this Deed shall have full force and effect between the parties

hereto.

2.6



EFFECTIVE



COVENANTS



BY



THE



DATE:



This



Deed



shall



take



effect



on



the



date hereof.



OBLIGORS



3.1

COVENANTS: Each Obligor hereby covenant with the Security Trustee that,

so long as any of the Secured Amounts remains outstanding, it will:

(a)



at all times give to the Security Trustee such information as the Security

Trustee may reasonably require for the purpose of the discharge of the

trusts, powers, rights, duties, authorities and discretions vested in it

hereunder or by operation of law; and



(b)



execute and do all such assurances, acts, deeds and things as the Security

Trustee may reasonably require for protecting or perfecting the security

over the Secured Property and the exercise of all powers, authorities and

discretions vested in the Security Trustee or in any receiver of the

Secured

Property and shall in

particular

execute all

transfers,

conveyances, assignments, assurances and registrations of the Secured

Property, whether to the Security Trustee or its nominees or purchasers or

subpurchasers, and give all notices, orders and discretions which the



Security Trustee may reasonably require as necessary or expedient.

SECURED

4.1



PROPERTY



AND



POWERS



OF



ENFORCEMENT



SECURITY:



(a)



The security created by the Security Documents shall be held by the

Security Trustee as a continuing security for the payment in full of the

Secured Amounts notwithstanding any settlement of account or any other act,

event or matter whatsoever;



(b)



The security created by the Security Documents shall not be satisfied by

any intermediate payment or satisfaction of any amount hereby or thereby

secured and the security so created shall be in addition to and shall not

be prejudiced by any other security or guarantee now or hereafter held by

the Security Trustee or any other person for all or any part of the Secured

Amounts hereby and thereby secured or the liability of any person for the

whole or any part of the Secured Amounts;



(c)



Every power and remedy given to the Security Trustee herein shall be in

addition to and not a limitation of any other power or remedy vested in the

Security Trustee under any of the Security Documents, or by statute, rule

or law or otherwise and all such powers may be exercised from time to time

and as often as the Security Trustee deems expedient.



-5

(d) Neither Section 93 nor Section 103 of the Law of Property

apply to any assignment created hereunder.



Act 1925 shall



4.2

ENFORCEMENT: Upon receipt by the Security Trustee of an Enforcement

Notice from the Agent, the security constituted by the Security Documents shall

become immediately enforceable. Upon the security constituted by the Security

Documents becoming enforceable, the Security Trustee shall, subject to it being

indemnified to its satisfaction, be bound without further notice to any party to

this Deed to enforce the same and shall incur no responsibility to any such

party for so doing.

SUSPENSE



ACCOUNT,



INVESTMENT



AND



ACCUMULATIONS



5.1

SUSPENSE ACCOUNT: Pending appropriation and distribution under clause 7,

the Security Trustee may place any sum received, recovered or held by it

representing or constituting Proceeds at any time after the security constituted

by the Security Documents becomes enforceable in a suspense account which it may

maintain for as long as it thinks fit until the Secured Amounts have been

discharged in full.

5.2

INVESTMENT OF PROCEEDS: The Security Trustee may invest in the name or

under the control of the Security Trustee an amount equal to the balance from

time to time standing to the credit of any suspense account in any of the

investments for the time being authorised by English law for the investment by

Security Trustees of trust moneys or in any other investments (whether similar

to the aforesaid or not) which may be selected by the Security Trustee as if the

Security Trustee were an absolute beneficial owner or by placing the same on

deposit in the name or under the control of the Security Trustee and in such

currency as the Security Trustee may think fit The Security Trustee may at any

time vary or transfer any of such investments for or into any other such

investments or convert any other moneys so deposited into any other currency and

shall not be responsible for any loss occasioned thereby (whether by

depreciation in value, fluctuation in exchange rates or otherwise) unless such

loss is occasioned by the wilful misconduct or fraud of the Security Trustee.

The Security Trustee shall not be under any obligation to diversify any

investment or investments made by it pursuant to this sub-clause.



5.3

ACCUMULATIONS: The resulting income arising on any investments made

pursuant to clause 5.2 above may, at the discretion of the Security Trustee, be

accumulated PROVIDED THAT if the Proceeds shall amount to a sum sufficient to

pay at least 5 per cent. of the principal amount of the Secured Amounts then

outstanding the Security Trustee shall thereupon appropriate and distribute the

Proceeds and any such accumulations in the manner and order provided in clause

7.1 BUT SO THAT for the purposes of this proviso (and this proviso alone) the

expression Proceeds shall not include any part thereof held on a suspense

account pursuant to clause 5.1 above.

-6

RELEASE



OF



SECURED



PROPERTY,



CONTINUATION



AND



PERPETUITY



PERIOD



6.1

RELEASE OF SECURED PROPERTY: On the payment or discharge of' the Secured

Amounts in full and subject to the Beneficiaries having no actual or contingent

liability to the Obligors with respect to obligations under the Facility and at

the written direction of the Agent, the Security Trustee will, at the cost and

expense of the relevant Obligor, (i) release the security constituted by the

Security Documents and reassign to the relevant Obligor or such other person as

the relevant Obligor may direct or such other person as may be entitled thereto

all of the Secured Property, and (ii) assign to Borrower's Agent any remaining

rights in the MOPU Agreement. Further, CSFB agrees and agrees to cause TIL to

obtain the Borrowers' Agent's written consent to any amendment, modification or

waiver to or under the MOPU Agreement, which consent shall not be unreasonably

withheld. The Obligors covenant and agree to comply with the terms of Section

6.3 of the MOPU Agreement.

6.2

CONTINUATION OF TRUSTS: The trusts constituted by the Security Documents

shall (subject to clause 6.3) remain in full force and effect for so long as any

amounts remain due to the Security Trustee, any Receiver or delegate of the

Security Trustee pursuant to the Security Documents and any of the Secured

Amounts remain due to any of the Beneficiaries or any Beneficiary has any actual

or contingent liability to the Borrowers in respect of the Facility.

6.3

PERPETUITY PERIOD: The perpetuity period applicable hereto under the

rule against perpetuities shall be the period of eighty years from the date of

these presents and every power, authority or discretion to which the said rule

applies which is conferred upon the Security Trustee or any other person by

these presents shall only be exercisable during that period.

DISTRIBUTION OF PROCEEDS

7.1

DISTRIBUTION: Subject to clause 5, after the security constituted by the

Security Documents shall have become enforceable, the Security Trustee shall

appropriate and distribute all Proceeds (subject to the payment of debts which

by law have priority) in the following manner and order (but so that in each

case only if and to the extent that appropriations and distributions of a higher

priority have been made in full):(a)



First, in or towards payment of all costs, charges,

expenses and

liabilities (together with accrued interest thereon as provided in any

other Security Document) properly incurred by the Security Trustee or any

Receiver, attorney, agent, delegate or other person appointed by the

Security Trustee under any of the Security Documents in the exercise or

purported exercise of any powers, authorities or discretions vested in it

or him pursuant to any of the Security Documents in respect of any security

interest created by any Obligor or any Security Document executed by any

Obligor;



(b)



Second, in or towards payment of all costs, charges, expenses and

liabilities (together with accrued interest thereon as provided in any

other Financing Document) properly incurred by the Agent in the exercise or

purported exercise of any powers, duties, obligations or discretions vested

in it or him pursuant to any of the Financing Documents;



(c)



Third, in or towards payment pro rata of any

Beneficiaries in respect of the Secured Amounts;



-7

(d) Fourth, in or towards payment pro rata of any

Beneficiaries in respect of the Secured Amounts;

(e)



interest



principal



due



to



the



due to the



Fifth, in or towards payment pro rata of all remaining sums or liabilities

due or owed to the Beneficiaries in respect of the Secured Amounts; and the

surplus (if any) after the payment in full of the Secured Amounts shall be

paid to or to the order of the Borrower's Agent or to such other person as

the Borrowers' Agent may notify to the Security Trustee, or as otherwise

required by any court of competent jurisdiction or applicable law, PROVIDED

THAT:

(i)



distributions by the Security Trustee shall be made at such times as

the Security Trustee in its absolute discretion determines to be as

soon as

reasonably

practical,

having regard to all relevant

circumstances;



(ii) as between the Beneficiaries, a Beneficiary shall be deemed to have

received from the Security Trustee any amount which the Security

Trustee is at any time required by law to deduct or withhold on

account of tax from any distribution received by that Beneficiary

under this Deed. However, this shall not prejudice any right which

that Beneficiary may have against the Obligors (whether under a

grossing-up clause or otherwise) but as between the Beneficiaries, any

such indebtedness shall rank after all other sums due and owing in

respect of the Secured Amounts;

(iii)for the purposes of any distribution by the Security Trustee (which

shall be made in accordance with clause 7.2), the Security Trustee may

fix a date as at which the amount of the Secured Amount is to be

calculated. For the purposes of determining the amount of any payment

to be made pursuant to paragraphs (c), (d) or (e) above to any

Beneficiary, the Security Trustee shall be entitled to call for a

certificate from the Agent as to the amount, currency and nature of

any Secured Amount owing or incurred to the relevant Beneficiary at

the date fixed by the Security Trustee for such purpose and as to such

other matters as the Security Trustee may deem necessary or desirable

to enable it to make a distribution. The Security Trustee shall be

entitled to rely on any such certificate:

(iv) if, after discharge of the costs, charges, expenses and liabilities

(together with accrued interest thereon) referred to in paragraphs (a)

and (b) above, the Proceeds remaining are insufficient to discharge in

full any of the aggregate amounts referred to in any of paragraphs

(c), (d) or (e) above, as the case may be, such remaining Proceeds

shall be paid to the Agent to be distributed pari passu and rateably

to the Beneficiaries in proportion to the respective portions of the

Secured Amounts owing to each Beneficiary;

-8

(v)



if any Proceeds shall be denominated in a currency (the "relevant

currency") other than that in which any Secured Amount is expressed to

be payable (the "contractual currency") the Security Trustee shall

convert the relevant Proceeds into the contractual currency upon

receipt or recovery of the same unless such sums are to be credited to

a suspense account and apply the same in accordance with the foregoing

provisions, but so that no action taken by the Security Trustee

pursuant to this proviso (v) shall in any way prejudice or affect the



rights or claims which any Beneficiary may have pursuant to the terms

of the Financing Documents; and

(vi) any distribution payment or transfer required to be made by the

Security Trustee pursuant to this Deed shall only be made subject to

any applicable laws and regulations.

7.2

DISTRIBUTIONS AND PAYMENTS: Distributions or payments of or on account

of any of the Secured Amounts described in paragraphs (c), (d) and (e) of clause

7.1 shall be made by the Security Trustee to the Agent. An acknowledgment of

receipt signed by the Agent or, as the case may be, the Borrowers' Agent or its

appointee shall be a good discharge of the Security Trustee.

7.3

UNWINDING: If and to the extent that any appropriation or distribution

shall at any time thereafter transpire to have been invalid or any sum so

distributed has to be refunded to any person under any law relating to

bankruptcy, insolvency or winding up or otherwise, the relevant distribution

shall be deemed never to have been made provided that any benefit obtained by

the person to whom the relevant distribution was originally made from the use of

the amount so distributed shall so long as it is retained (free from

liabilities) by such person, be deducted from any interest which becomes payable

in accordance herewith on such amount from the date of such distribution to the

(date on which it is deemed never to have been made (such resulting amount never

however to be a negative amount).

7.4

REQUIRED PREPAYMENTS: Any amounts received by the Security Trustee

pursuant to the terms of either the MOPU Agreement or the Amni Agreement shall

be applied by the Agent as a prepayment against the Outstandings; provided any

amounts received shall first be applied to reimburse the Agent for (i)

reasonable collection costs incurred with respect to the Amni Guaranty and (ii)

any payments made by the Agent to Sedco Forex as required pursuant to the terms

of MOPU Agreement.

SECURITY

8.1



TRUSTEE'S

RIGHTS



(a)



AND



RIGHTS,



DUTIES



AND



SUPPLEMENTAL



POWERS



DUTIES:



The Security Trustee shall have only those duties, obligations andresponsibilities expressly specified in this Deed or the other

Security Documents and shall not have any implied duties, obligations

or responsibilities. In performing or carrying out its duties,

obligations and responsibilities, the Security Trustee shall be

considered to be acting only in a mechanical and administrative

capacity (save as expressly provided in this Deed or the other

Security Documents) and shall not have or be deemed to have any duty,

obligation or responsibility to or relationship of trust or agency

with any of the Obligors;

-9-





(b)



The Security Trustee may refrain from taking any (or any further)

action or exercising any rights under or in respect of this Deed or

any other Security Documents until it has received instructions from

the Agent (or other person for the time being entitled to give such

instructions) as to whether (and, if it is to be, the way in which) it

is to be taken or exercised. In the absence of such instructions, the

Security Trustee may act or refrain from acting as it shall see fit.

The Security Trustee shall in all cases when acting or refraining from

acting as the case may be, be in no way responsible for any loss

except in the case of wilful misconduct or where the Security Trustee

has failed to show the degree of diligence and care required of it

having regard to the provisions of this Deed or the Security

Documents;



(c)



The Security Trustee shall not be liable for any action taken or

omitted by it under or in connection with the Security Documents in

good faith;



(d)



The Security Trustee shall not be liable to bring any proceedings

against the Obligors for the recovery of any sum due under any of the

Financing Documents or otherwise in connection therewith unless it has

been fully indemnified to its satisfaction by each of the Lenders in

the proportion which its Outstandings bear to the Total Outstandings

(or if no

Outstandings,

its

Commitment

bears to the Total

Commitments);



(e)



Notwithstanding that the Security Trustee is a Beneficiary, it may

take, or refrain from taking, any action which it would be entitled to

take in its capacity as a Beneficiary if it was not the Security

Trustee and shall not be precluded by virtue of its position as a

Beneficiary from exercising any of its discretions, powers and duties

as Security Trustee;



(f)



Each of the Lenders shall fully indemnify the Security Trustee

rateably in the proportion which its Outstandings bears to the Total

Outstandings (or if no Outstandings, its Commitment bears to the Total

Commitments), from and against all claims, proceedings, expenses,

losses, damages and liabilities of every description (except in

respect of any remuneration due to the Security Trustee) which may be

incurred by the Security Trustee in such capacity in good faith and

which in any way relate to or arise out of the Financing Documents or

any related documents or any action taken or omitted by the Security

Trustee in enforcing or preserving, or in attempting to enforce or

preserve, any of the rights of the Beneficiaries under the Financing

Documents or any related documents.



8.2

By way of supplement to the Trustee Act 1925 it is expressly declared as

follows:

(a)



RELIANCE ON EXPERTS: The Security Trustee may in relation to the

Financing Documents act on the opinion or advice of, or a certificate

or any information obtained from, any lawyer,

banker, valuer,

surveyor, securities company, broker, auctioneer, accountant or other

expert in the United Kingdom or elsewhere, whether obtained by the

Security Trustee, any Receiver or the Agent, and shall not be

responsible for any loss occasioned by so acting.



(b)



CERTIFICATES: Any such opinion, advice, certificate or information may

be sent or obtained by letter, telegram, telex, facsimile reproduction

or in any other form and the Security Trustee shall not be liable for

acting on any opinion, advice, certificate or information purporting

to be so conveyed although the same shall contain some error or shall

not be authentic PROVIDED THAT such error or lack of authenticity is

not manifest.



(c)



DISCRETION: The Security Trustee shall (save as expressly otherwise

provided in any of the Security Documents) as regards all rights,

powers, authorities and discretions vested in it by any of the

Security Documents, or by operation of law, have complete discretion

as to the exercise or non-exercise thereof.



(d)



INVESTMENT BY WAY OF NOMINEES: Any investment made by the Security

Trustee pursuant to clause 5 may, at its discretion, be made or

retained in the name or names of a nominee or nominees.

-10-







(e)



DOCUMENT PLACEMENT: The Security Trustee shall be at liberty to place

this Deed, any of the other Security Documents and all deeds and other

documents relating to this Deed or any of the other Security Documents

with any bank or banking company, or lawyer or firm of lawyers

believed by it to be of good repute, in any part of the world, and the

Security Trustee shall not be responsible for or be required to insure

against any loss incurred in connection with any such deposit and the

Borrowers' Agent shall pay all sums required to be paid on account of

or in respect of any such deposit.



(f)



AGENTS: The Security Trustee may, in the conduct of the trust

business, instead of acting personally, employ and pay an agent to

transact or conduct, or concur in transacting or conducting, any

business and to do or concur in doing all acts required to be done by

the Security Trustee (including the receipt and payment of money). The

Security Trustee shall not be responsible for any misconduct on the

part of any person appointed by it in good faith hereunder or be bound

to supervise the proceedings or acts of any such persons.



(g)



SECURITY TRUSTEE REFRAINING FROM ACTING: The Security Trustee may

refrain from doing anything which would or might in its opinion be

contrary to any law of any jurisdiction or any directive or regulation

of any agency of any state or which would or might otherwise render it

liable to any person and may do anything which is, in its absolute

discretion, necessary to comply with any such law, directive or

regulation.



(h)



DISCLAIMERS AND EXCLUSIONS:

(i)



The Security Trustee shall not be responsible for recitals or

statements, warranties or representations of any party (other

than the Security Trustee) contained in any of the Financing

Documents and shall not be required to examine or enquire into

the title of the Obligors to the Secured Property or any other

part of the undertaking, property and assets charged by any of

the Security Documents, or the right of the Obligors to exercise

the powers and discretions described in the Financing Documents

to the intent that the Security Trustee shall not in any way be

responsible for its inability to exercise any of the rights

conferred herein or in any of the other Security Documents or for

any loss or damage thereby occasioned;



(ii) The Security Trustee shall not be bound to give notice to any

person of the execution of the Security Documents nor shall it be

liable for any failure, omission or defect in perfecting the

security intended to be constituted by the Security Documents

including, without prejudice to the generality of the foregoing,

(a) failure to obtain any license, consent or other authority for

the execution of the same, (b) failure to register the same in

accordance with the provisions of any of the documents of title

of the Obligors to any of the Secured Property, and (c) failure

to effect or procure registration of or otherwise protect any of

the Security

Documents by registering the same under any

registration laws in any territory, or by registering any notice,

caution or other entry

prescribed by or pursuant to the

provisions of the said laws;

(iii)The Security

Trustee

shall not be

responsible

for the

genuineness, validity or effectiveness of any of the Security

Documents or any obligations or rights created or purported to be

created thereby or any security constituted or purported to be

constituted by or pursuant to any of the Security Documents, nor

shall it be responsible or liable to any person because of any

invalidity of any provision of such documents, whether arising

from statute, law or decision of any court;



-11

(iv) The Security Trustee shall not be liable or responsible for any

loss, cost, damage, expense or inconvenience which may result

from anything done or omitted to be done by it under any of the

Security Documents, except such as arise as a result of the

wilful misconduct or fraud of the Security Trustee. SUPPLEMENTAL

PROVISIONS REGARDING THE SECURITY TRUSTEE

9.1

OBLIGORS' PERFORMANCE: Except as herein otherwise expressly provided,

the Security Trustee shall be and is hereby authorised to assume without

enquiry, and it is hereby declared to be the intention of the Security Trustee

that it shall assume without enquiry, that the Obligors are duly performing and

observing all the covenants and provisions contained in the Financing Documents

and on their part to be performed and observed and that no Event of Default or

Potential Event if Default has occurred. No Beneficiary other than the Agent

shall be entitled to require the Security Trustee to take any action or

proceedings under any of the Security Documents whatsoever, whether to enforce

the performance of any covenant or obligation by the Obligors or otherwise.

9.2

DELEGATION: The Security Trustee may, in the execution of an or any of

the trusts, powers, authorities and discretions vested in it by any of the

Security Documents, act by responsible officers or a responsible officer for the

time being of the Security Trustee. The Security Trustee may also, whenever it

thinks expedient in the interests of the Beneficiaries, whether by power of

attorney or otherwise, delegate to any person or persons all or any of the

trusts, rights, powers, duties, authorities and discretions vested in it by any

of the Security Documents. Any such delegation may be made upon such terms and

conditions and subject to such regulations (including power to sub-delegate) as

the Security Trustee may think fit in the interests of the Beneficiaries and,

PROVIDED THAT the Security Trustee shall have exercised reasonable care in the

selection of such delegate and, where a power to sub-delegate has been given,

has obliged the delegate to exercise reasonable care in the selection of any

sub-delegate, the Security Trustee shall not be responsible for any loss

incurred by any misconduct or default on the part of such delegate or

sub-delegate. The Security Trustee shall give prompt notice to the Borrowers'

Agent and the Agent of the appointment of any delegate as aforesaid and shall

procure that any delegate shall also give prompt notice of the appointment of

any sub-delegate to the Borrowers' Agent and the Agent.

9.3

CONTRACTS: The Security Trustee shall not, and no director or officer of

the Security Trustee shall, by reason of the fiduciary position of the Security

Trustee, be in any way precluded from making any contracts or entering into any

transactions in the ordinary course of business with the Obligors or from

accepting the trusteeship of any stock, shares, debenture stock, debentures or

securities of the Obligors. Without prejudice to the generality of the

foregoing, it is expressly declared that such contracts and transactions include

any contract or transaction in relation to the placing, underwriting,

purchasing, subscribing for or dealing with or lending money upon or making

payments in respect of any stock, shares, debenture stock, debentures or other

securities of the Obligors or any contract of banking or insurance with the

Obligors. Neither the Security Trustee nor any such director or officer shall be

accountable to any Lender or the Obligors for any profit, fees, commissions,

interest, discounts or share of brokerage earned, arising or resulting from any

such contracts or transactions. The Security Trustee and any such director or

officer shall be at liberty to retain the same for its or his own benefit.

-12

9.4

ADDITIONAL POWERS: The powers conferred by this Deed and the other

Security Documents upon the Security Trustee shall be in addition to any powers

which may from time to time be vested in it by applicable law.

SECURITY TRUSTEE'S REMUNERATION AND INDEMNITIES



10.1



REMUNERATION:

(a)



If the Security Trustee finds it expedient or is required to undertake

any material duties in the course of its trusteeship under any of the

Security Documents (which shall, without limitation, be presumed once

the Security Trustee shall have become bound to enforce the security

constituted by the Security Documents or when, in the opinion of the

Security Trustee acting in good faith, circumstances exist in which

such event may occur), the Borrowers shall pay such remuneration as

shall be agreed between the Security Trustee and the Borrowers' Agent.

If the Security Trustee and the Borrowers' Agent fail to agree the

amount of any remuneration as aforesaid, it shall be determined by a

chartered accountant selected by the Security Trustee and approved by

the Borrowers' Agent or, failing such approval, nominated by the

President for the time being of the Institute of Chartered Accountants

in England and Wales. The expenses involved in such nomination and the

fees of such chartered accountant shall be paid by the Borrowers'

Agent. The determination of such chartered accountant (who shall be

deemed to be acting as an expert and not as an arbitrator) shall be

conclusive and binding upon the Security Trustee and the Borrowers'

Agent (absent fraud or manifest error);



(b)



The Borrowers' Agent shall pay to the Security Trustee an amount equal

to the amount of any value added tax or similar tax chargeable in

respect of its remuneration hereunder.



10.2

EXPENSES AND COSTS: The Borrowers' Agent shall on demand from time to

time pay, in each case on the basis of a full indemnity to the Security Trustee:

(a)



all costs and expenses (including legal, printing, publicity and

out-of-pocket expenses) reasonably incurred in connection with the

negotiation, preparation or completion of the Security Documents;



(b)



all costs, charges and expenses (including travelling expenses) which

the Security Trustee may reasonably incur in relation to the exercise

of the rights, powers, duties, authorities and discretions or the

execution of the trusts vested in it by or pursuant to any of the

Security Documents; and



(c)



at such daily and/or hourly rates as the Security Trustee shall from

time to time reasonably determine, all costs and expenses (including

without limitation,

telephone, fax, copying, travel, legal and

personnel costs) in connection with the Security Trustee taking such

action as it may deem appropriate, in complying with any instructions

from the Agent or any request by the Borrowers' Agent in connection

with:

-13-





(i)



the granting or proposed granting of any waiver or consent under

any of the Security Documents;



(ii) any amendment

Documents;



or



proposed



amendment



to any



of the



Security



(iii)any breach by any Obligor of any of its obligations under any of

the Security Documents or any investigation as to whether any

such breach may have occurred;

(iv) the occurrence of any Event of Default;

(v)



the review, preservation and/or enforcement or the attempted

presentation or enforcement of any of the rights of the Security



Trustee,

and



the Agent and the Lenders under the Security Documents;



(vi) the transfer or possible transfer of the role of Security Trustee

to another person. Reference in this sub-clause to costs, charges

and expenses shall include value added tax or similar tax charged

in respect thereof

10.3

GENERAL INDEMNITY: The

indemnify the Security Trustee



Obligors shall jointly and severally fully

and keep it indemnified:



(a)



in respect of all liabilities and expenses properly incurred by it or

by any person appointed by it to whom any trust, power, authority or

discretion may be delegated by it in the execution or purported

execution of the trusts, powers, authorities or discretions vested in

it by any of the Security Documents, except to the extent that they

are sustained or incurred as a result of the wilful misconduct or

fraud of the Security Trustee; and



(b)



against all losses, liabilities, actions, proceedings, costs,

and demands in respect of any matter or thing done or omitted

way relating to any of the Security Documents, except to the

that they are sustained or incurred as a result of the

misconduct or fraud of the Security Trustee.



claims

in any

extent

wilful



10.4

COSTS INDEMNITY: To the extent that the Obligors do not perform its

indemnity obligations described in this clause 10 or fails to make any payment

which it is obliged to discharge under clause 17, the Agent shall indemnify the

Security Trustee and keep it indemnified against any cost, expense or liability

(including duties and taxes) sustained or incurred by the Security Trustee:

(a)



in complying with an Enforcement Notice and in enforcing the security

constituted by the Security Documents or otherwise under any of the

Security Documents, except to the extent that it is sustained or

incurred as a result of the wilful misconduct or fraud of the Trustee;



(b)



by any person appointed by it to whom any trust,

duties, authorities or discretions may be delegated

or exercise or purported execution or exercise of the

powers, duties, authorities or discretions vested in

Security Documents; and



rights, powers,

in the execution

trusts, rights,

it by any of the



-14

(c)



in respect of any matter or thing done or omitted in any way relating

to any of the Security Documents, except to the extent that it is

sustained or incurred as a result of the wilful misconduct or fraud of

the Security Trustee.



10.5

PAYMENT: All sums payable under sub-clauses 10.2 and 10.3 of this

clause shall be payable on demand. All sums payable by the Obligors under this

clause shall carry interest at the rate of two per cent (2%) per annum. above

the normal lending rate of a leading bank that is available to the Security

Trustee in the principal financial centre relevant to the currency in which the

same are due for overdraft facilities in that currency from the date of the same

being demanded.

10.6

CONTINUATION: Unless otherwise specifically stated in any discharge of

these presents, the provisions of this clause 10 shall continue in full force

and effect notwithstanding such discharge.

ACTION OF SECURITY TRUSTEES

11.1

MAJORITY DECISIONS: Whenever there shall be more than two Security

Trustees hereof the majority of such Security Trustees shall (provided such



majority includes a trust corporation) be competent to execute and exercise all

the trusts, rights, powers, duties, authorities and discretions vested by any of

the Security Documents in the Security Trustee generally.

11.2

RELIANCE: The Security Trustee shall be entitled to rely upon any

directions or any instructions given or purported to be given by the Agent,

notwithstanding any error in transmission or that such directions or

instructions prove not to be genuine, and such directions or instructions shall

be conclusively deemed to be valid directions or instructions from the Agent to

the Security Trustee for the purposes of this Deed PROVIDED THAT the Security

Trustee may decline to act on any such directions or instructions where in the

opinion of the Security Trustee they are insufficient, incomplete, inconsistent

or not received by the Security Trustee in sufficient time to act thereon or in

accordance therewith.

APPOINTMENT



OF



NEW



OR



FURTHER



SECURITY



TRUSTEES



12.1

POWER TO APPOINT: The power of appointing new Security Trustees shall

be vested in the Agent acting on the directions of the Majority Lenders, with

the consent of the Borrowers' Agent (not to be unreasonably withheld). The

Agent, acting on the instructions of the Majority Lenders, may at any time by

notice in writing to the Borrowers' Agent and the Security Trustee remove any

Security Trustee or Security Trustees for the time being hereof. The removal of

a Security Trustee shall not become effective unless there remains a Security

Trustee or Security Trustees in office after such removal. The Security Trustee

shall notify the Agent of its removal and/or the proposed appointment of a new

Security Trustee.

12.2

CO-SECURITY TRUSTEES: Notwithstanding the provisions of clause 12.1,

the Security Trustee may, with the consent of the Borrowers' Agent (not to be

unreasonably withheld) and the Agent, appoint any person (whether a trust

corporation or not) to act either as a separate Security Trustee or as a

co-Security Trustee jointly with the Security Trustee:

(a)



if the Security Trustee considers

interests of the Beneficiaries, or



(b)



for the purposes

restriction.



of



conforming



such

to



any



appointment

legal



to be in the



requirement



or



-15

Such person shall (subject always to the provisions of the Security Documents)

have such trusts, rights, powers, duties, authorities and discretion (not

exceeding those conferred on the Security Trustee by the Security Documents) and

such duties and obligations as shall be conferred or imposed by the instrument

of appointment. The Security Trustee shall have power in like manner to remove

any such person. Such reasonable remuneration as the Security Trustee may pay to

any such person, together with any attributable costs, charges and expenses

reasonably incurred by it in performing its function as such separate Security

Trustee or co-Security Trustee, shall, to the extent payable if the same had

been incurred by the Security Trustee, for the purposes of this Deed, be treated

as costs, charges and expenses incurred by the Security Trustee.

RESIGNATION



OF



SECURITY



TRUSTEE



13.1

Any Security Trustee for the time being of these presents may retire at

any time without assigning any reason therefor and without being responsible for

any costs occasioned by such retirement. In that event, the Agent shall, subject

to the prior written consent of the Borrowers' Agent (such consent not to be

unreasonably withheld or delayed), appoint a Beneficiary or any other bank or

financial institution to act as Security Trustee in its stead or, if no such

person is so appointed within 30 days of the Security Trustee tendering its

resignation, the Security Trustee may, in consultation with the Borrowers'

Agent, appoint a Beneficiary or, with the prior written consent of the



Borrowers' Agent (such consent not to be unreasonably withheld or delayed) any

other reputable bank or financial institution so to act. The retirement of a

sole Security Trustee shall not take effect until the appointment of a new

Security Trustee or two or more new Security Trustees has been effected.

13.2



Upon



the



retirement



of



any



Security



Trustee:



(a)



the retiring Security Trustee shall be discharged

obligation under the Financing Documents; and



from any further



(b)



the successor Security Trustee and each of the other parties to this

Deed shall have the same rights and obligations amongst themselves as

they would have had if the successor had been a party to this Deed as

Security Trustee for the Beneficiaries.



MODIFICATIONS

14.

The Security Trustee may from time to time and at any time with the

consent of the Agent and the Borrowers' Agent, concur in making any modification

of any Security Document, if in the opinion of the Security Trustee such

modification:

(a)



is of a formal, minor or technical nature; or



(b)



is made to correct a manifest error; or



(c)



is not Prejudicial in the opinion

interests of the Beneficiaries, or



of the



Security



Trustee to the



-16

(d)



is made to perfect or give effect to any charge or security created or

intended to be created by that Security Document or to facilitate the

exercise, or the proposed exercise, of any of the Security Trustee's

or any Receiver's powers or the protection, management or realisation

of any of the Secured Property.



NOTICES

15.1

NOTICES: Each notice, request, demand, approval, certificate or other

communication to be given or made by one person to another under these presents

shall be given, made or served by telex, facsimile or letter to its address,

telex or facsimile number in the Facility Agreement, or to such other address,

telex or facsimile number as such person may have notified to the Security

Trustee and the other parties hereto by not less than 15 days notice in writing

as the address, telex or facsimile number for the time being of such person. All

notices, requests, demands or other communications to or from any Beneficiary

under or with respect to these presents shall be made or given through the

Agent.

15.2

TIME FOR NOTICE: When any provision is made in these presents for

notice of a specified number of days' or Business Days' duration, no account

shall be taken, in computing the period of days' or Business Days' notice given,

of the day on which such notice is delivered.

15.3

EFFECTIVENESS OF NOTICES: No communication from the Borrowers' Agent

shall be effective until received by the Security Trustee. Any other

communication to any person shall be deemed to be received by that person (if

sent by telex or facsimile) when such communication has been dispatched and the

appropriate answerback or confirmation received or (if sent by letter) when left

at the appropriate address or (as the case may be) three days after being

deposited in the post (first class postage prepaid) in an envelope addressed to

such person at that address.

LANGUAGE



16.

All documents to be furnished or communications to be given or made

pursuant to this Deed shall be made in the English language or, if in another

language, shall be accompanied by a translation into English on which

translation the Security Trustee shall be entitled to rely.

STAMP DUTIES

17.

The Borrowers' Agent will pay all stamp duties, capital duties and other

similar duties on or in connection with the execution, maintenance or

enforcement of any of the Security Documents. If, in consequence of an Event of

Default the Security Trustee (or any Receiver or person delegated by the

Security Trustee) shall take any proceedings permitted to be taken by the terms

of this Deed to enforce the obligations of the Borrowers' Agent under any of the

Security Documents and for the purposes of such proceedings any of the Security

Documents are taken into any jurisdiction and stamp duties, capital duties or

other similar duties or taxes become payable on any of the Security Documents

before or in connection with such proceedings in such jurisdiction, the

Borrowers' Agent will forthwith pay (or reimburse the person making payment of)

all such stamp duties, capital duties and other similar duties and taxes,

including penalties (if any).

-17

WAIVERS

18.1

WAIVER OF BREACH: The Security Trustee may (without prejudice to its

rights in respect of any subsequent breach) from time to time and at any time

authorise or waive, on such terms and conditions as it may specify, any breach

by the Borrowers' Agent of any of the covenants or provisions contained in any

of the Security Documents, PROVIDED ALWAYS THAT the Security Trustee shall not

exercise any powers conferred on it by this sub-clause unless it has been

directed to do so by the Agent. No such direction shall affect any authorisation

or waiver previously given or made. Any such waiver or authorisation shall be

binding on all of the Beneficiaries.

18.2

IMPLIED WAIVER: No course of dealing by the Security Trustee with any

person and no failure or delay on the part of the Security Trustee to execute or

exercise any trust, right, power, duty, discretion or authority under any of the

Security Documents or provided by statute or by law or in equity or otherwise

shall impair or operate as a waiver of any such trust, right, power, duty,

discretion or authority or be construed as a waiver of any default or as an

acquiescence therein. Any single or partial execution or exercise of any such

trust, right, power, duty, discretion or authority shall not preclude any other

or further execution or exercise thereof or the execution or exercise of any

other rights, privileges or remedies. The rights and remedies contained in the

Security Documents are cumulative and not exclusive of any other right and

remedy which the Beneficiaries or any of them would have for the effective

enforcement of the rights accorded in any of the Security Documents.

TAXES

19.

Notwithstanding anything herein contained, to the extent required by any

applicable law, if the Security Trustee shall be required to deduct or withhold

from any distribution or payment made by it hereunder or if the Security Trustee

shall otherwise be liable to tax as a consequence of performing its duties

hereunder, any amount for which the Security Trustee may be liable, whether as

principal or agent, by reason of any assessment or prospective assessment to

taxation of whatsoever nature and whensoever made upon the Security Trustee in

connection with or arising from any sums received by it or to which it may be

entitled under any of the Security Documents (other than in connection with its

remuneration specified in clause 10) or any investments from time to time

representing the same, including any income or gains arising therefrom or any

action of the Security Trustee in or about the administration of the trusts of

any of the Security Documents (other than the remuneration specified in clause



10), the Security Trustee shall be entitled to make such deduction or

withholding in respect of taxation. If the Security Trustee incurs any loss,

cost, liability or expense by reason of any such assessment for which no such

deduction or withholding has been made by the Security Trustee or if any such

deduction or withholding is insufficient, the Borrowers' Agent will indemnify

the Security Trustee therefor and the Security Trustee shall be entitled to

reimbursement of such amounts from the Secured Property.

-18

POWER OF



ATTORNEY



20.1

APPOINTMENT: Each Obligor by way of security irrevocably appoints the

Security Trustee and every Receiver of the Secured Property, each with full

power of substitution and each with full power to act alone, to be its attorney

and in its name and on its behalf to execute and as its act and deed or

otherwise to do all such assurances, acts or things which the Obligor ought to

do under the covenants and provisions contained in the Security Documents, and

generally in its name and on its behalf to exercise all or any of the powers,

authorities and discretions conferred by or pursuant to the Security Documents

on the Security Trustee or any Receiver and (without prejudice to the generality

of the foregoing):

(a)



to execute,

seal and deliver and otherwise perfect any deed,

assignment, transfer, assurance, agreement, instrument or act which

may, in the opinion of such attorney, be required or deemed necessary

for the purposes of giving effect to the Security Documents and for

the purpose of the exercise of any of the powers conferred on such

attorney pursuant to this Deed; and



(b)



on and after the Security Trustee becoming bound to enforce the

security constituted by the Security Documents in accordance with

clause 4, to ask, require, demand, receive, compound, give acquittance

for, settle and compromise any and all moneys and claims for moneys

due and to become due under or arising out of the Security Documents,

to endorse any cheques or other instruments or orders in connection

therewith, to file any claim, to take any action or institute any

proceedings which the Security Trustee may deem to be necessary or

advisable and to execute any documents and do anything necessary or

desirable under this Deed or any of the other Security Documents and

with full power to delegate any of the rights and powers hereby

conferred upon it, PROVIDED THAT the appointment hereby made shall

cease to have any force or effect when the provisions for release

under clause 6.1 have been satisfied.



20.2

RATIFICATION: Each Obligor hereby ratifies and confirms and agrees to

ratify and confirm whatever any such attorney as is mentioned in clause 20.1

shall do or purport to do in the exercise or purported exercise of all or any of

the powers, authorities and discretions referred to therein.

PARTIAL



INVALIDITY



21.

If any of the provisions of this Deed becomes invalid, illegal or

unenforceable in any respect under any law, the validity, legality or

enforceability of the remaining provisions shall not in any way be affected or

impaired.

COUNTERPARTS

22.

shall



This Deed may be executed in any number of copies which taken together

constitute a single deed.



GOVERNING



LAW



AND



JURISDICTION



23.1

GOVERNING LAW: This Deed shall be governed by, and interpreted and

construed in accordance with English law.

-19

23.2



JURISDICTION:



(a)



All the parties agree that the courts of England are (subject to (b)

and (c) below, to have exclusive jurisdiction to settle any disputes

(including claims for set-off or counterclaim) which may arise in

connection with the validity, effect, interpretation or performance

of, or the legal relationships established by, this Deed or otherwise

arising in connection with this Deed;



(b)



the agreement contained in paragraph (a) above is included for the

benefit of the Security Trustee. Accordingly, notwithstanding the

exclusive agreement in (a) above the Security Trustee shall retain the

right to bring proceedings in any other court which has jurisdiction

by virtue of the Convention on Jurisdiction and the Enforcement of

Judgments signed on 27 September 1968 (as from time to time amended

and extended) or by virtue of the Convention on jurisdiction and the

Enforcement of Judgments signed on 16 September 1988 (as from time to

time amended and extended);



(c)



the Security Trustee may in its absolute discretion take proceedings

in the courts of any other country which may have jurisdiction, to

whose jurisdiction each of the other parties irrevocably submits;



(d)



the Obligors irrevocably waive any objections on the ground of venue

or forum non conveniens or any similar grounds; and



(e)



the Obligors irrevocably consent to service of process by mail or in

any other manner permitted by the relevant law.



23.3

TRIAL BY JURY: Each of the parties hereby irrevocably waives an the

rights to trial by jury in any action, proceeding or counterclaim (whether based

on contract, tort or otherwise) arising out of or relating to any of the

Security Documents or the actions of the parties in the negotiation,

administration, performance or enforcement thereof.

23.4

AGENT FOR SERVICE OF PROCESS: Each of the Obligors shall at all times

maintain an agent for service of process and any other documents in proceedings

in England or any other proceedings in connection with this Deed. Such agent

shall be Law Debenture Corporate Services Limited, the address of which on the

date hereof is Princes House, 95 Gresham Street, London EC2V 7LY, England and

any writ, judgment or other notice of legal process shall be sufficiently served

on the Obligors or any of them if delivered to such agent at its address for the

time being. The Obligors each undertakes not to revoke the authority of the

above agent and if, for any reason, the Security Trustee requests it to do so it

shall promptly appoint another such agent with an address in England and advise

the Security Trustee thereof. If, following such a request, any Obligor fails

to appoint another agent, the Security Trustee shall be entitled to appoint one

on its behalf.

-20

IN WITNESS WHEREOF this Deed has been executed by the parties hereof as a Deed

the day and year first above written.

ABACAN RESOURCE CORPORATION,

as a Deed

By:

[ J. Harvie

]



Signature: /s/ James S. Harvie

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



By



[ T.B.



Folawiyo



]



Signature: /s/ Tunde Folawiyo

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



DAHOMEY RESOURCE CORPORATION

As a Deed

By:

[ W.G. Cherwayko

]

By:



[



T.B.



Folawiyo



]



LIBERTY TECHNICAL SERVICES

As a Deed

By:

[ W.G. Cherwayko

By:



[



T.B.



[



T.B.



Signature: /s/ Tunde Folawiyo

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



LTD.



Folawiyo



ABACAN RESOURCES (BENIN)

As a Deed

By:

[ W.G. Cherwayko

By:



Signature: /s/ Wade G. Cherwayko

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



]



Signature: /s/ Wade G. Cherwayko

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



]



Signature: /s/ Tunde Folawiyo

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



LIMITED



Folawiyo



]



Signature: /s/ Wade G. Cherwayko

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



]



Signature: /s/ Tunde Folawiyo

------------------21-





WEST AFRICAN

As a Deed



RESOURCE



CORPORATION



By:



[



W.G.



Cherwayko



]



Signature: /s/ Wade G. Cherwayko

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



By:



[



T.B.



Folawiyo



]



Signature: /s/ Tunde Folawiyo

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



AGBARA RESOURCES

As a Deed



LIMITED



By:



[



W.G.



Cherwayko



]



Signature: /s/ Wade G. Cherwayko

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



By:



[



T.B.



Folawiyo



]



Signature: /s/ Tunde Folawiyo

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



ABACAN POWER

As a Deed



(BENIN)



LIMITED



By:



[



W.G.



Cherwayko



]



Signature: /s/ Wade G. Cherwayko

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



By:



[



T.B.



Folawiyo



]



Signature: /s/ Tunde Folawiyo

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



ABACAN-ADDAX BENIN CONSORTIUM S.A.

As a Deed

By:

[ W.G. Cherwayko

]

By:



[



T.B.



Folawiyo



]



Signature: /s/ Wade G. Cherwayko

-----------------Signature: /s/ Tunde Folawiyo



------------------22

ANGUS INTERNATIONAL

As a Deed



RESOURCES



LTD.



By:



[



W.G.



Cherwayko



]



Signature: /s/ Wade G. Cherwayko

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



By:



[



T.B.



Folawiyo



]



Signature: /s/ Tunde Folawiyo

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



PROFILE INTERNATIONAL

As a Deed



LTD.



By:



[



W.G.



Cherwayko



]



Signature: /s/ Wade G. Cherwayko

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



By:



[



T.B.



Folawiyo



]



Signature: /s/ Tunde Folawiyo

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



CREDIT SUISSE FIRST BOSTON

As Lender, Agent and Security

By:



[



T.



Patrick



By:



[



Alex



Gantner



Trustee



]



Signature: /s/ T. Patrick

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



]



Signature: /s/ Alex Gantner

------------------23-





SCHEDULE 1

SUPPLEMENTAL DEED - NEW PARTICIPANT

SUPPLEMENTAL



DEED



dated



__________



19__



BETWEEN:

[NAME



OF



NEW



PARTICIPANT]



of



[principal



office]



(the



NEW



BENEFICIARY);



ABACAN RESOURCE CORPORATION, DAHOMEY RESOURCE CORPORATION, LIBERTY TECHNICAL

SERVICES LTD., ABACAN RESOURCES (BENIN) LIMITED, WEST AFRICAN RESOURCE

CORPORATION, AGBARA RESOURCES LIMITED, ABACAN POWER (BENIN) LIMITED,

ABACAN-ADDAX BENIN CONSORTIUM S.A., ABACAN RESOURCES (NIGERIA) LTD., ANGUS

INTERNATIONAL RESOURCES LTD., and PROFILE INTERNATIONAL LTD., (individually and

collectively, the AObligors@);

CREDIT



SUISSE



FIRST



BOSTON



(as



AGENT);



CREDIT



SUISSE



FIRST



BOSTON



(as



SECURITY



and

TRUSTEE).



WHEREAS:

(A)

This Deed is entered into pursuant to clause 2.2 of the Security Trust

Deed (the TRUST DEED) dated July 2, 1998 between the Obligors, Credit Suisse

First Boston as Agent, the Security Trustee and others.

(B)

The New Beneficiary has entered into a Transfer Certificate dated

_________ 19__ with [name of Transferor] pursuant to clause 19 of the Facility

Agreement.



(C)

NOW



The New Beneficiary has agreed

THIS DEED WITNESSETH as follows:



1.

Words

meanings in

requires.



to



accede



to



the



Trust



Deed.



and expressions defined in the Trust Deed bear the same respective

this Deed (including the recitals) unless the context otherwise



2.

The New Beneficiary shall with effect from the date hereof be bound by

the provisions of the Trust Deed as a Beneficiary and shall have an the rights

and obligations set out in the Trust Deed as rights and obligations of a

Beneficiary. In particular (without limitation) the Security Trustee agrees that

it shall hold the Secured Property in accordance with the provisions of the

Security Documents on trust for the New Beneficiary (in addition to the other

Beneficiaries) in accordance with the Trust Deed. The New Beneficiary confirms

its acceptance of all the provisions of the Trust Deed.

3.



The



Agent



shall



be



the



representative



of



the



New



Beneficiary.



-24

4.

The provisions of clause 23 of the Trust Deed shall apply to this Deed as

if each

reference therein to "this Deed" included a reference to this Deed.

IN WITNESS

written.

[

as



the



New



WHEREOF



this



Deed



has been executed the day and year first above



],

Beneficiary

Signature:_________________________



ABACAN RESOURCE

as a Deed



CORPORATION



By:



[



]



Signature:_________________________



By



[



]



Signature:_________________________



DAHOMEY RESOURCE

As a Deed



CORPORATION



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________



LIBERTY TECHNICAL

As a Deed



SERVICES



LTD.



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________

-25-





ABACAN RESOURCES

As a Deed



(BENIN)



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________



WEST



AFRICAN



RESOURCE



LIMITED



CORPORATION



As



a



Deed



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________



AGBARA RESOURCES

As a Deed



LIMITED



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________

-26-





ABACAN POWER

As a Deed



(BENIN)



LIMITED



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________



ABACAN-ADDAX

As a Deed



BENIN



CONSORTIUM



S.A.



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________



ABACAN RESOURCES

As a Deed



(NIGERIA)



LTD.



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________

-27-





ANGUS INTERNATIONAL

As a Deed



RESOURCES



LTD.



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________



PROFILE INTERNATIONAL

As a Deed



LTD.



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________



CREDIT SUISSE

As Agent and



FIRST BOSTON

Security Trustee



By:



[



]



Signature:_________________________



By:



[



]



Signature:_________________________

-28-













EX-10.10

15



EXHIBIT



10.10

ROYALTY AGREEMENT

NIGERIAN OIL CONCESSION BLOCK 309



Date



effective



the



8th



day



of



March,



1992.



BETWEEN:

LIBERTY TECHNICAL SERVICES LTD.

a body corporate, having an office

Lagos, Nigeria (the "Grantor")

-



and



ABACAN INTERNATIONAL RESOURCE

a body corporate, having an

Lagos, Nigeria (the "Royalty



in



the



City



of



INC.

the City



of



MANAGEMENT

office in

Owner")



RECITALS:

1.



The Royalty Owner was instrumental in introducing the Grantor to the

Nigerian Oil Industry, the Indigenous Nigerian Oil Program and certain

indigenous Nigerian oil concession owners;



2.



The Royalty Owner was instrumental in assisting the Grantor with obtaining

recognition with the Nigerian Ministry of Petroleum Resources, such

recognition being a requirement of the Ministry for a company to acquire

and maintain a Participating Interest in oil concession properties located

in Nigeria;



3.



The Grantor and Royalty Owner have agreed that the Royalty Owner shall be

entitled to a gross overriding royalty on petroleum substance production by

or through the Grantor in Nigeria as follows:



NOW



THEREFORE,



1.



The Grantor hereby grants to the Royalty Owner, effective as of the

effective date hereof, and subject to the limitations set forth in

Paragraph 2 herein, an overriding royalty (the "Overriding Royalty") on any

and all oil, natural gas and condensate ("Petroleum Substances") produced

from Nigerian oil concession block 309 ("Concession Block 309"). The gross

volume of Petroleum Substances comprising the Overriding Royalty shall be

one and one half percent (1.5) of the gross monthly production of Petroleum

Substances generated from producing wells attributable to the Grantor. For

greater certainty, the Royalty Owner shall be entitled to receive 1.650% of

all Petroleum Substances produced from Concession Block 309 before payout

and 0.840% of all Petroleum Substances produced from Concession Block 309

after payout. The Overriding Royalty shall not be considered to be an

interest in land, but rather an interest only in the Petroleum Substances

actually produced from Concession Block 309.



the



Grantor



and



Royalty



Owner



agree



as



follows:





2.

The grant of the Overriding Royalty Owner shall not include Petroleum

Substances which the Grantor uses and considers to be reasonably necessary

for the Grantor's drilling and production operations for Concession Block



309 and shall not include

Petroleum

Substances which the Grantor

unavoidably loses in those drilling and production operations. These

drilling and production operations include the use of the Petroleum

Substances in batteries, treaters, compressors, separators, satellites and

similar equipment serving only royalty wells on Concession Block 309 but

shall not include the use of Petroleum Substances for any enhanced recovery

operations or fuel stock for any battery or satellite serving wells in

addition of royalty wells on Concession Block 309 or for any gas plant or

refinery.

3.



The proceeds of sale of the Overriding Royalty which the Grantor realizes

from the disposition of Petroleum Substances produced from the Royalty

Lands shall be subject to the same adjustments for costs and expenses of

bringing the Petroleum Substances to the point of sale as the Grantor would

be entitled to deduct therefrom if the Overriding Royalty were the lessor

royalty accruing to the Nigerian

Ministry of Petroleum

Resources.

Regulations pertaining to prices for the calculation of royalties payable

to the Government of Nigeria for Concession Block 309 shall apply to the

Petroleum Substances relating the Overriding Royalty in determining the

value of the Overriding Royalty.



4.



When the Grantor receives any money on account of or as the proceeds of

sale of the Petroleum Substances relating to the Overriding Royalty, the

Grantor shall receive that money as trustee for the Royalty Owner. The

Grantor shall remit to the Royalty Owner all monies accruing to the Royalty

Owner on account of the Overriding Royalty on or before the last day of the

calendar month next following the calendar month in which such Petroleum

Substances were sold. The Grantor shall enclose with that payment a copy of

all reports the Grantor is required to submit under any applicable

government regulations for the production of such Petroleum Substances and

a written statement showing in reasonable detail the manner in which the

Grantor calculated that payment.



5.



The Grantor shall comply with all terms and conditions of the oil

prospecting license or oil mining lease in effect for Concession Block 309,

including the payment of rentals, royalties and the performance of all

things necessary to maintain the title documents in good standing and in

full force and effect, all in accordance with and subject to the provisions

of the Joint Venture Agreement between the Grantor and the owner of

Concession Block 309. This clause shall not, however, obligate the Grantor

to conduct any drilling, geophysical or geological operation on Concession

Block 309 or to pay compensatory royalty to maintain a title document, as

it pertains to Concession Block 309, in full force and effect where the

requirement to conduct such operation or to pay compensatory royalty may be

avoided by the surrender of lands subject to the affected title document to

the issuer thereof. The Grantor shall comply with all terms and conditions

of any encumbrances agreed to be borne by the Grantor.



6.



Each Party entitled to information obtained hereunder may use such

information for its sole benefit. However, the parties shall take such

measures with respect to operations

and internal

security as are

appropriate in the circumstances to keep confidential from third persons

all such information, except information which the Parties have expressly

agreed among themselves to release and information disclosed by a Party:

(a)



When and to the extent required by any government regulations and

securities laws applicable to such Party, provided that such Party

shall invoke any confidentiality

protection

permitted by such

government regulations and securities law;



(b)



to an affiliate, provided that such Party shall be

required such affiliate to maintain the confidential

disclosed information and that such affiliate shall be

accepted such obligation and that such Party shall be

loss suffered by the Parties, or any of them, because



deemed to have

status of the

deemed to have

liable for any

of the failure



of such affiliate to maintain such information confidential;

(c)



to a third party to which such Party has been permitted to assign a

portion of its interest hereunder, provided that a binding covenant is

obtained from such third person prior to disclosure which provides,

inter alia, that none of such information shall be disclosed by it to

any other third person;

2





(d)



to the technical, financial or other professional consultants of such

Party which requires such information to provide their service to such

Party or to a bank or other financial institution from which such

Party is attempting to obtain financing, provided that a binding

covenant is obtained from such consultant or financier, as the case

may be, prior to such disclosure, which provides, inter alia, that

none of such information shall be disclosed by it to any other third

person or use for any purpose other than advising such Party or

providing financing to such Party, as the case may be; and



However, the confidentiality obligation in this Clause shall not extend to

information to the extent it is in the public domain, provided that specific

items of information shall not be considered to be in the public domain merely

because more general information is in the public domain.

7.



If any Party is prevented by force majeure from fulfilling any obligation

hereunder, the obligations of the Party, insofar only as its obligations

are affected by the force majeure, shall be suspended while the force

majeure continues to prevent the performance of such obligation and for

that time thereafter as that Party may reasonably require to commence to

fulfil such obligation. A Party prevented from fulfilling any obligation by

force majeure shall promptly give the other Parties notice of the force

majeure and the affected obligations.



8.



For the purpose of this Clause, "force majeure" means an occurrence beyond

the reasonable control of the Party claiming suspension of an obligation

hereunder, which has not been caused by such Party's negligence and which

such Party was unable to prevent or provide against by the exercise of

reasonable diligence at a reasonable cost and includes, without limiting

the generality of the foregoing,

an act of God, war, revolution,

insurrection, blockage, riot, strike, a lockout or other industrial

disturbance, fire, lightning, unusually severe weather, storms, floods,

explosion,

accident, shortage of labour or materials or government

restraint, action, delay or inaction.



9.



No waiver by any Party of any breach (whether actual or anticipated) of any

of the covenants, provisos, conditions, restrictions or stipulations herein

contained shall take effect or be binding upon that Party unless the same

is expressed in writing under the authority of that Party. Any waiver so

given shall extend only to the particular breach so waived and shall not

limit or affect any rights with respect to any other future breach.



10.



Each Party shall from time to time and at all times do all such further

acts and execute and deliver all further deeds and documents as may be

reasonably required in order to perform and carry on the terms of this

Royalty Agreement.



11.



This Royalty Agreement supersedes all other requirements, documents,

writing and verbal understandings among the Parties relating to Concession

Block 309 and any production facilities, and expresses all of the terms and

conditions agreed upon by the Parties with respect to the Concession Block

309.



12.



This Royalty



Agreement shall for all purposes be construed and interpreted



according to the laws of England applicable therein. The courts having

jurisdictions with respect to matters relating to this Royalty Agreement

shall be the Courts of England.

THIS



AGREEMENT



EFFECTIVE



as



of



the



LIBERTY

Per:



day



and year first above written.



TECHNICAL



SERVICES



LTD.



/s/ Wade Cherwayko

---------------------3





ABACAN INTERNATIONAL RESOURCE

MANAGEMENT INC.

Per:



/s/ Wade Cherwayko

---------------------4











EX-10.11

16



EXHIBIT



10.11

ROYALTY/REVENUE INTEREST SALE AGREEMENT

NIGERIAN OIL CONCESSION BLOCK 469



THIS



AGREEMENT



made



and



entered



into



this



31st



day



of



March,



1997:



BETWEEN:

YINKA FOLAWIYO PETROLEUM COMPANY LIMITED, a

corporation incorporated pursuant to the laws

(hereinafter referred to as "YFP")



of



Nigeria,



and

LIBERTY TECHNICAL SERVICES LTD. of 7th Floor,

Plaza, 38 Warehouse Road, Lagos, Nigeria,

(hereinafter referred to as "Liberty")



Folawiyo



RECITALS

WHEREAS:

1.



By virtue of a Participation Agreement dated February 23, 1994 (the

"Participation Agreement"),

YFP acquired an overriding royalty (the

"Overriding Royalty") consisting an entitlement to receive the proceeds of

sale of 0.7500% of all Petroleum Substances produced and sold from Nigerian

oil Concession Block OPL 469 ("Concession Block 469") before payout and

0.3817% of all Petroleum Substances produced and sold from Concession Block

469 after payout;



2.



Under the terms of the Participation Agreement, in addition to the

Overriding

Royalty,

YFP acquired a revenue interest (the "Revenue

Interest") on Concession Block 469 that provides YFP with an entitlement to

receive the proceeds of sale of 1.70775% of all Petroleum Substances

produced and sold from Concession Block 469 before payout and 0.8694% of

all Petroleum Substances produced and sold from Concession Block 469 after

payout;



3.



YFP has agreed to sell, assign and convey to Liberty, all of its Overriding

Royalty and a portion of its Revenue Interest in the percentages set forth

herein,

in

consideration

of the

payment

by Liberty to YFP of

U.S.$3,732,504.95, to be satisfied by the issuance of 477,761 common shares

of Abacan Resource Corporation to YFP at a price of 7.8125 per common

share;



NOW THEREFORE in consideration of the mutual covenants herein contained, the

Parties hereto agree as follows:



1.

YFP shall and hereby does irrevocably sell, convey, assign and transfer

unto Liberty, all of YFP's right, title and interest to and in the

Overriding Royalty consisting of an entitlement to receive the proceeds of

sale of 0.7500% of all Petroleum Substances produced and sold from

Concession Block 469 before payout and 0.3817% of all Petroleum Substances

produced and sold from Concession Block 469 after payout (the "Sold

Overriding Royalty Interest").

2.



YFP shall and hereby does irrevocably sell, convey, assign and transfer

unto Liberty, 6.5% of YFP's right title and interest to and in the Revenue

Interest consisting of an entitlement to receive the proceeds of sale of

0.11125% of all Petroleum Substances produced and sold from Concession

Block 469 before payout and 0.05671% of all Petroleum Substances produced

and sold from Concession Block 469 after payout (the "Sold Revenue

Interest").



3.



Liberty hereby agrees to pay to YFP a purchase price of U.S.$3,732,504.95

for the Sold Overriding Royalty Interest and the Sold Revenue Interest,

which sums shall be satisfied by the delivery of 477,761 common shares of

Abacan Resource Corporation (the "Abacan Shares"). YFP agrees to accept the

Abacan Shares subject to any and all restrictions on trading imposed by

applicable regulatory authorities.



4.



YFP and Liberty hereby acknowledge, confirm and agree that upon the

fulfilment of the conditions set out in Paragraph 7 herein and the payment

of the consideration set out in Paragraph 3 above, the interests and right

to the proceeds of sale of the Parties in the Overriding Royalty Interest,

expressed as a percentage of all Petroleum Substances produced and sold

from Concession Block 469, both before and after payout shall be as

follows:



NAME OF PARTY

BEFORE PAYOUT

AFTER PAYOUT

- ---------------------------------------- -------------- ------------Yinka Folawiyo Petroleum Company Limited

0.0%

0.0%

- ---------------------------------------- -------------- ------------Liberty Technical Services Ltd.

- ---------------------------------------5.



0.7500%

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



0.3817%

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



YFP and Liberty hereby acknowledge, confirm and agree that upon the

fulfilment of the conditions set out in Paragraph 7 herein and the payment

of the consideration set out in Paragraph 3 above, the interests and the

right to the proceeds of sale of the Parties in the Revenue Interest,



expressed as a percentage of all Petroleum Substances produced and sold

from Concession Block 469, both before and after payout shall be as

follows:

NAME OF PARTY

BEFORE PAYOUT

AFTER PAYOUT

- ---------------------------------------- -------------- ------------Yinka Folawiyo Petroleum Company Limited

1.59650%

0.81269%

- ---------------------------------------- -------------- ------------Liberty Technical Services Ltd.

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



0.11125%

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



0.05671%

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





6.

YFP represents and warrants to Liberty that the Sold Overriding Royalty

Interest and the Sold Revenue Interest are each free and clear of any

charges, liens or other encumbrances to any and all third parties and that

any and all corporate steps, consents, resolutions or approvals necessary

to give effect to the sale and assignment of the Sold Overriding Royalty

Interest and Sold Revenue Interest has been duly and fully obtained.

7.



The completion of this transaction and the issuance of the Abacan Shares

contemplated herein shall be subject to receipt by Abacan Resource

Corporation of all necessary and applicable regulatory approvals. This

condition is for the sole benefit of Liberty and may be waived by it in

writing at its sole discretion.



8.



Each Party shall from time to time and at all necessary times do all such

further acts and execute and deliver all further deeds and documents as may

be reasonably required in order to perform and carry out the terms of this

Royalty/Revenue Interest Sale Agreement.



IN WITNESS WHEREOF the

executed by their duly

above written.

Liberty

Limited



Per:



Technical



Parties hereto have caused the within presents to be

authorized representatives on the day and year first



Services



Ltd.



/s/ Wade Cherwayko

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



Yinka



Per:



Folawiyo



/s/ T.B. Folawiyo

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











EX-10.12

17



EXHIBIT



10.12

ROYALTY AGREEMENT

NIGERIAN OIL CONCESSION BLOCK 469



Date



effective



BETWEEN:



the



19th



day



of



August,



Petroleum



1993.



Company



LIBERTY TECHNICAL SERVICES LTD.

a body corporate, having an office

Lagos, Nigeria (the "Grantor")



in



the



City



of



INC.

the City



of



- and ABACAN INTERNATIONAL RESOURCE

a body corporate, having an

Lagos, Nigeria (the "Royalty



MANAGEMENT

office in

Owner")



RECITALS:

1.



The Royalty Owner was instrumental in introducing the Grantor to the

Nigerian Oil Industry, the Indigenous Nigerian Oil Program and certain

indigenous Nigerian oil concession owners;



2.



The Royalty Owner was instrumental in assisting the Grantor with obtaining

recognition with the Nigerian Ministry of Petroleum Resources, such

recognition being a requirement of the Ministry for a company to acquire

and maintain a Participating Interest in oil concession properties located

in Nigeria;



3.



The Grantor and Royalty Owner have agreed that the Royalty Owner shall be

entitled to a gross overriding royalty on petroleum substance production by

or through the Grantor in Nigeria as follows:



NOW



THEREFORE,



the



Grantor



and



Royalty



Owner



agree



as



follows:





1.

The Grantor hereby grants to the Royalty Owner, effective as of the

effective date hereof, and subject to the limitations set forth in

Paragraph 2 herein, an overriding royalty (the "Overriding Royalty") on any

and all oil, natural gas and condensate ("Petroleum Substances") produced

from Nigerian oil concession block 469 ("Concession Block 469"). The gross

volume of Petroleum Substances comprising the Overriding Royalty shall be

one and one half percent (1.5) of the gross monthly production of Petroleum

Substances generated from producing wells attributable to the Grantor. For

greater certainty, the Royalty Owner shall be entitled to receive 0.825% of

all Petroleum Substances produced from Concession Block 469 before payout

and 0.420% of all Petroleum Substances produced from Concession Block 469

after payout. The Overriding Royalty shall not be considered to be an

interest in land, but rather an interest only in the Petroleum Substances

actually produced from Concession Block 469.

2.



The grant of the Overriding Royalty Owner shall not include Petroleum

Substances which the Grantor uses and considers to be reasonably necessary

for the Grantor's drilling and production operations for Concession Block

469 and shall not include

Petroleum

Substances which the Grantor

unavoidably loses in those drilling and production operations. These

drilling and production operations include the use of the Petroleum

Substances in batteries, treaters, compressors, separators, satellites and

similar equipment serving only royalty wells on Concession Block 469 but

shall not include the use of Petroleum Substances for any enhanced recovery

operations or fuel stock for any battery or satellite serving wells in

addition of royalty wells on Concession Block 469 or for any gas plant or

refinery.



3.



The proceeds of sale of the Overriding Royalty which the Grantor realizes

from the disposition of Petroleum Substances produced from the Royalty

Lands shall be subject to the same adjustments for costs and expenses of

bringing the Petroleum Substances to the point of sale as the Grantor would

be entitled to deduct therefrom if the Overriding Royalty were the lessor

royalty accruing to the Nigerian

Ministry of Petroleum

Resources.



Regulations pertaining to prices for the calculation of royalties payable

to the Government of Nigeria for Concession Block 469 shall apply to the

Petroleum Substances relating the Overriding Royalty in determining the

value of the Overriding Royalty.

4.



When the Grantor receives any money on account of or as the proceeds of

sale of the Petroleum Substances relating to the Overriding Royalty, the

Grantor shall receive that money as trustee for the Royalty Owner. The

Grantor shall remit to the Royalty Owner all monies accruing to the Royalty

Owner on account of the Overriding Royalty on or before the last day of the

calendar month next following the calendar month in which such Petroleum

Substances were sold. The Grantor shall enclose with that payment a copy of

all reports the Grantor is required to submit under any applicable

government regulations for the production of such Petroleum Substances and

a written statement showing in reasonable detail the manner in which the

Grantor calculated that payment.



-2

5.

The Grantor shall comply with all terms and conditions of the oil

prospecting license or oil mining lease in effect for Concession Block 469,

including the payment of rentals, royalties and the performance of all

things necessary to maintain the title documents in good standing and in

full force and effect, all in accordance with and subject to the provisions

of the Joint Venture Agreement between the Grantor and the owner of

Concession Block 469. This clause shall not, however, obligate the Grantor

to conduct any drilling, geophysical or geological operation on Concession

Block 469 or to pay compensatory royalty to maintain a title document, as

it pertains to Concession Block 469, in full force and effect where the

requirement to conduct such operation or to pay compensatory royalty may be

avoided by the surrender of lands subject to the affected title document to

the issuer thereof. The Grantor shall comply with all terms and conditions

of any encumbrances agreed to be borne by the Grantor.

6.



Each Party entitled to information obtained hereunder may use such

information for its sole benefit. However, the parties shall take such

measures with respect to operations

and internal

security as are

appropriate in the circumstances to keep confidential from third persons

all such information, except information which the Parties have expressly

agreed among themselves to release and information disclosed by a Party:

(a)



When and to the extent required by any government regulations and

securities laws applicable to such Party, provided that such Party

shall invoke any confidentiality

protection

permitted by such

government regulations and securities law;



(b)



to an affiliate, provided that such Party shall be deemed to have

required such affiliate to maintain the confidential status of the

disclosed information and that such affiliate shall be deemed to have

accepted such obligation and that such Party shall be liable for any

loss suffered by the Parties, or any of them, because of the failure

of such affiliate to maintain such information confidential;



(c)



to a third party to which such Party has been permitted to assign a

portion of its interest hereunder, provided that a binding covenant is

obtained from such third person prior to disclosure which provides,

inter alia, that none of such information shall be disclosed by it to

any other third person;



(d)



to the technical, financial or other professional consultants of such

Party which requires such information to provide their service to such

Party or to a bank or other financial institution from which such

Party is attempting to obtain financing, provided that a binding

covenant is obtained from such consultant or financier, as the case



may be, prior to such disclosure, which provides, inter alia, that

none of such information shall be disclosed by it to any other third

person or use for any purpose other than advising such Party or

providing financing to such Party, as the case may be; and

However, the confidentiality obligation

extend to information to the extent it

provided that specific items of information

be in the public domain merely because more

the public domain.



in this Clause shall not

is in the public domain,

shall not be considered to

general information is in



-3

7.

If any Party is prevented by force majeure from fulfilling any obligation

hereunder, the obligations of the Party, insofar only as its obligations

are affected by the force majeure, shall be suspended while the force

majeure continues to prevent the performance of such obligation and for

that time thereafter as that Party may reasonably require to commence to

fulfil such obligation. A Party prevented from fulfilling any obligation by

force majeure shall promptly give the other Parties notice of the force

majeure and the affected obligations.

8.



For the purpose of this Clause, "force majeure" means an occurrence beyond

the reasonable control of the Party claiming suspension of an obligation

hereunder, which has not been caused by such Party's negligence and which

such Party was unable to prevent or provide against by the exercise of

reasonable diligence at a reasonable cost and includes, without limiting

the generality of the foregoing,

an act of God, war, revolution,

insurrection, blockage, riot, strike, a lockout or other industrial

disturbance, fire, lightning, unusually severe weather, storms, floods,

explosion,

accident, shortage of labour or materials or government

restraint, action, delay or inaction.



9.



No waiver by any Party of any breach (whether actual or anticipated) of any

of the covenants, provisos, conditions, restrictions or stipulations herein

contained shall take effect or be binding upon that Party unless the same

is expressed in writing under the authority of that Party. Any waiver so

given shall extend only to the particular breach so waived and shall not

limit or affect any rights with respect to any other future breach.



10.



Each Party shall from time to time and at all times do all such further

acts and execute and deliver all further deeds and documents as may be

reasonably required in order to perform and carry on the terms of this

Royalty Agreement.



11.



This Royalty Agreement supersedes all other requirements, documents,

writing and verbal understandings among the Parties relating to Concession

Block 469 and any production facilities, and expresses all of the terms and

conditions agreed upon by the Parties with respect to the Concession Block

469.



12.



This Royalty Agreement shall for all purposes be construed and interpreted

according to the laws of England applicable therein. The courts having

jurisdictions with respect to matters relating to this Royalty Agreement

shall be the Courts of England.

THIS



AGREEMENT



EFFECTIVE



as



of



the



day



and year first above written.



LIBERTY TECHNICAL SERVICES LTD.

Per: /s/ Wade Cherwayko

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



ABACAN INTERNATIONAL RESOURCE MANAGEMENT INC.

Per: /s/ Wade Cherwayko

-------------------4







EX-10.13

18



EXHIBIT



10.13

ROYALTY/REVENUE INTEREST SALE AGREEMENT

NIGERIAN OIL CONCESSION BLOCK 237



THIS



AGREEMENT



made



and



entered



into



this



31st



day



of



March,



1997:



BETWEEN:

YINKA FOLAWIYO PETROLEUM COMPANY LIMITED, a

corporation incorporated pursuant to the laws

(hereinafter referred to as "YFP")



of



Nigeria,



and

LIBERTY TECHNICAL SERVICES LTD. of 7th Floor,

Plaza, 38 Warehouse Road, Lagos, Nigeria,

(hereinafter referred to as "Liberty")



Folawiyo



RECITALS

WHEREAS:

1.



By virtue of a Participation/Royalty Agreement dated effective April 5,

1995, (the "Participation/Royalty Agreement") YFP acquired an overriding

royalty (the "Overriding Royalty") consisting an entitlement to receive the

proceeds of sale of 0.77379% of all Petroleum Substances produced and sold

from Nigerian oil Concession Block OPL 237 ("Concession Block 237") before

payout and 0.39393% of all Petroleum Substances produced and sold from

Concession Block 237 after payout;



2.



Under the terms of the Participation/Royalty Agreement, in addition to the

Overriding

Royalty,

YFP acquired a revenue interest (the "Revenue

Interest") on Concession Block 237 that provides YFP with an entitlement to

receive the proceeds of sale of 1.707% of all Petroleum Substances produced

and sold from Concession Block 237 before payout and 0.869% of all

Petroleum Substances produced and sold from Concession Block 237 after

payout;



3.



YFP has agreed to sell, assign and convey to Liberty, all of its Overriding

Royalty and a portion of its Revenue Interest in the percentages set forth

herein, in consideration of the payment of U.S.$3,767,495.05 to be

satisfied by the issuance of 482,239 common shares of Abacan Resource

Corporation to YFP at a price of $7.8125 per common share;



NOW



THEREFORE



in



consideration



of the mutual covenants herein contained, the



Parties



hereto



agree



as



follows:





1.

YFP shall and hereby does irrevocably sell, convey, assign and transfer

unto Liberty, all of YFP's right, title and interest to and in the

Overriding Royalty consisting of an entitlement to receive the proceeds of

sale of 0.7739% of all Petroleum Substances produced and sold from

Concession Block 237 before payout and 0.39393% of all Petroleum Substances

produced and sold from Concession Block 237 after payout (the "Sold

Overriding Royalty Interest").

2.



YFP shall and hereby does irrevocably sell, convey, assign and transfer

unto Liberty, 5.6% of YFP's right title and interest to and in the Revenue

Interest consisting of an entitlement to receive the proceeds of sale of

0.09554% of all Petroleum Substances produced and sold from Concession

Block 237 before payout and 0.04863% of all Petroleum Substances produced

and sold from Concession Block 237 after payout (the "Sold Revenue

Interest").



3.



Liberty hereby agrees to pay to YFP a purchase price of U.S.$3,767,495.05

for the Sold Overriding Royalty Interest and the Sold Revenue Interest,

which sums shall be satisfied by the delivery of 482,239 common shares of

Abacan Resource Corporation (the "Abacan Shares"). YFP agrees to accept the

Abacan Shares subject to any and all restrictions on trading imposed by

applicable regulatory authorities.



4.



YFP and Liberty hereby acknowledge, confirm and agree that upon the

fulfilment of the conditions set out in Paragraph 7 herein and the payment

of the consideration set out in Paragraph 3 above, the interests and right

to the proceeds of sale of the Parties in the Overriding Royalty Interest,

expressed as a percentage of all Petroleum Substances produced and sold

from Concession Block 237, both before and after payout shall be as

follows:



NAME OF PARTY

BEFORE PAYOUT

AFTER PAYOUT

- ---------------------------------------- -------------- ------------Yinka Folawiyo Petroleum Company Limited

0.0%

0.0%

- ---------------------------------------- -------------- ------------Liberty Technical Services Ltd.

- ---------------------------------------5.



0.7739%

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



0.39393%

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



YFP and Liberty hereby acknowledge, confirm and agree that upon the

fulfilment of the conditions set out in Paragraph 7 herein and the payment

of the consideration set out in Paragraph 3 above, the interests and the

right to the proceeds of sale of the Parties in the Revenue Interest,

expressed as a percentage of all Petroleum Substances produced and sold

from Concession Block 237, both before and after payout shall be as

follows:



NAME OF PARTY

BEFORE PAYOUT

AFTER PAYOUT

- ---------------------------------------- -------------- ------------Yinka Folawiyo Petroleum Company Limited

1.61146%

0.82037%

- ---------------------------------------- -------------- ------------Liberty Technical Services Ltd.

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



0.09554%

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



0.04863%

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



2



6.

YFP



represents



and warrants to Liberty that the Sold



Overriding



Royalty



Interest and the Sold Revenue Interest are each free and clear of any

charges, liens or other encumbrances to any and all third parties and that

any and all corporate steps, consents, resolutions or approvals necessary

to give effect to the sale and assignment of the Sold Overriding Royalty

Interest and Sold Revenue Interest has been duly and fully obtained.

7.



The completion of this transaction and the issuance of the Abacan Shares

contemplated herein shall be subject to receipt by Abacan Resource

Corporation of all necessary and applicable regulatory approvals. This

condition is for the sole benefit of Liberty and may be waived by it in

writing at its sole discretion.



8.



Each Party shall from time to time and at all necessary times do all such

further acts and execute and deliver all further deeds and documents as may

be reasonably required in order to perform and carry out the terms of this

Royalty/Revenue Interest Sale Agreement.



IN WITNESS WHEREOF the

executed by their duly

above written.

Liberty

Limited



Per:



Technical



Parties hereto have caused the within presents to be

authorized representatives on the day and year first



Services



/s/ Wade Cherwayko

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



Ltd.



Yinka



Per:



Folawiyo



Petroleum



Company



/s/ T.B. Folawiyo

--------------------3











EX-10.14

19





EXHIBIT



10.14

ROYALTY AGREEMENT



Date



effective



the



2nd



day



of



December,



1994.



BETWEEN:

LIBERTY TECHNICAL SERVICES LTD.

body corporate, having an office

Lagos, Nigeria (the "Grantor")



in



the



City



of



- and ABACAN INTERNATIONAL RESOURCE

a body corporate, having an

Lagos, Nigeria (the "Royalty



MANAGEMENT

office in

Owner")



INC.

the City



of



RECITALS:

1.



The Royalty Owner was instrumental in introducing the Grantor to the

Nigerian oil industry, the Indigenous Nigerian Oil Program and certain

indigenous Nigerian oil concession owners;



2.



The Royalty Owner was instrumental in assisting the Grantor with obtaining

recognition with the Nigerian Ministry of Petroleum Resources, such

recognition being a requirement of the Ministry for a company to acquire

and maintain a Participating Interest in oil concession properties located

in Nigeria;



3.



The Grantor and Royalty Owner have agreed that the Royalty Owner shall be

entitled to a gross overriding royalty on petroleum substance production by

or through the Grantor in Nigeria.



NOW



THEREFORE,



1.



The Grantor hereby grants to the Royalty Owner, effective as of April 5,

1995, and subject to the limitations set forth in Paragraph 2 herein, an

overriding royalty (the "Overriding Royalty") on any and all oil, natural

gas and condensate ("Petroleum Substances") produced from Nigerian oil

concession block OPL 237 ("Concession Block 237"). The gross volume of

Petroleum Substances comprising the Overriding Royalty shall be three

percent (3%) of the gross monthly production of Petroleum Substances

generated from producing wells attributable to the Grantor. For greater

certainty, the Royalty Owner shall be entitled to receive 1.501% of all

Petroleum Substances produced from Concession Block 237 before payout and

0.764% of all Petroleum Substances produced from Concession Block 237 after

payout. The Overriding Royalty shall not be considered to be an interest in

land, but rather an interest only in the Petroleum Substances actually

produced from Concession Block 237.



the



Grantor



and



Royalty



Owner



agree



as



follows:





2.

The grant of the Overriding Royalty to the Royalty Owner shall not include

Petroleum Substances which the Grantor uses and considers to be reasonably

necessary for the Grantor's drilling and production

operations for

Concession Block 237 and shall not include Petroleum Substances which the

Grantor unavoidably loses in those drilling and production operations.

These drilling and production operations include the use of the Petroleum

Substances in batteries, treaters, compressors, separators, satellites and

similar equipment serving only royalty wells on Concession Block 237 but

shall not include the use of Petroleum Substances for any enhanced recovery

operations or fuel stock for any battery or satellite serving wells in

addition of royalty wells on Concession Block 237 or for any gas plant or

refinery.

3.



The proceeds of sale of the Overriding Royalty which the Grantor realizes

from the disposition of Petroleum Substances produced from the Royalty

Lands shall be subject to the same adjustments for costs and expenses of

bringing the Petroleum Substances to the point of sale as the Grantor would

be entitled to deduct therefrom if the Overriding Royalty were the lessor

royalty accruing to the Nigerian

Ministry of Petroleum

Resources.

Regulations pertaining to prices for the calculation of royalties payable

to the Government of Nigeria for Concession Block 237 shall apply to the

Petroleum Substances relating the Overriding Royalty in determining the

value of the Overriding Royalty.



4.



When the Grantor receives any money on account of or as the proceeds of

sale of the Petroleum Substances relating to the Overriding Royalty, the

Grantor shall receive that money as trustee for the Royalty Owner. The

Grantor shall remit to the Royalty Owner all monies accruing to the Royalty

Owner on account of the Overriding Royalty on or before the last day of the

calendar month next following the calendar month in which such Petroleum

Substances were sold. The Grantor shall enclose with that payment a copy of

all reports the Grantor is required to submit under any applicable

government regulations for the production of such Petroleum Substances and

a written statement showing in reasonable detail the manner in which the

Grantor calculated that payment.



5.



The Grantor shall comply with all terms and conditions of the oil

prospecting license or oil mining lease in effect for Concession Block 237,

including the payment of rentals, royalties and the performance of all

things necessary to maintain the title documents in good standing and in

full force and effect, all in accordance with and subject to the provisions

of the Joint Venture Agreement between the Grantor and the owner of

Concession Block 469. This Clause shall not, however, obligate the Grantor

to conduct any drilling, geophysical or geological operation on Concession

Block 237 or to pay compensatory royalty to maintain a title document, as

it pertains to Concession Block 237, in full force and effect where the

requirement to conduct such operation or to pay compensatory royalty may be

avoided by the surrender of lands subject to the affected title document to

the issuer thereof. The Grantor shall comply with all terms and conditions

of any encumbrances agreed to be borne by the Grantor.



6.



Each Party entitled to information obtained hereunder may use such

information for its sole benefit. However, the parties shall take such

measures with respect to operations

and internal

security as are

appropriate in the circumstances to keep confidential from third persons

all such information, except information which the Parties have expressly

agreed among themselves to release and information disclosed by a Party:

(a)



When and to the extent required by any government regulations and

securities laws applicable to such Party, provided that such Party

shall invoke any confidentiality

protection

permitted by such

government regulations and securities law;

-2-





(b)



to an affiliate, provided that such Party shall be deemed to have

required such affiliate to maintain the confidential status of the

disclosed information and that such affiliate shall be deemed to have

accepted such obligation and that such Party shall be liable for any

loss suffered by the Parties, or any of them, because of the failure

of such affiliate to maintain such information confidential;



(c)



to a third person to which such Party has been permitted to assign a

portion of its interest hereunder, provided that a binding covenant is

obtained from such third person prior to disclosure which provides,

inter alia, that none of such information shall be disclosed by it to

any other third person;



(d)



to the technical, financial or other professional consultants of such

Party which require such information to provide their services to such

Party or to a bank or other financial institution from which such

Party is attempting to obtain financing, provided that a binding

covenant is obtained from such consultant or financier, as the case

may be, prior to such disclosure, which provides, inter alia, that

none of such information shall be disclosed by it to any other third

person or use for any purpose other than advising such Party or

providing financing to such Party, as the case may be; and

However, the confidentiality obligation

extend to information to the extent it

provided that specific items of information

be in the public domain merely because more

the public domain.



7.



in this Clause shall not

is in the public domain,

shall not be considered to

general information is in



If any Party is prevented by force majeure from fulfilling any obligation

hereunder, the obligations of the Party, insofar only as its obligations

are affected by the force majeure, shall be suspended while the force

majeure continues to prevent the performance of such obligation and for

that time thereafter as that Party may reasonably require to commence to



fulfil such obligation. A Party prevented from fulfilling any obligation by

force majeure shall promptly give the other Parties notice of the force

majeure and the affected obligations.

For the purpose of this Clause, "force majeure" means an occurrence beyond

the reasonable control of the Party claiming suspension of an obligation

hereunder, which has not been caused by such Party's negligence and which

such Party was unable to prevent or provide against by the exercise of

reasonable diligence at a reasonable cost and includes, without limiting

the generality of the foregoing,

an act of God, war, revolution,

insurrection, blockage, riot, strike, a lockout or other industrial

disturbance, fire, lightning, unusually severe weather, storms, floods,

explosion,

accident, shortage of labour or materials or government

restraint, action, delay or inaction.

8.



No waiver by any Party of any breach (whether actuator anticipated) of any

of the covenants, provisos, conditions, restrictions or stipulations herein

contained shall take effect or be binding upon that Party unless the same

is expressed in writing under the authority of that Party. Any waiver so

given shall extend only to the particular breach so waived and shall not

limit or affect any rights with respect to any other future breach.



9.



Each Party shall from time to time and at all times do all such further

acts and execute and deliver all further deeds and documents as may be

reasonably required in order to perform and carry on the terms of this

Royalty Agreement.



-3

10. This Royalty Agreement supersedes all other requirements, documents,

writing and verbal understandings among the Parties relating to Concession

Block 237 and any production facilities, and expresses all of the terms and

conditions agreed upon by the Parties with respect to the Concession Block

237.

11.



This Royalty Agreement shall enure to the benefit of and shall bind the

Parties, their respective successors and assigns and the heirs, executors,

administrators and assigns of natural persons who are or become Parties.



12.



This Royalty Agreement shall for all purposes be construed and interpreted

according to the laws of England applicable therein. The courts having

jurisdictions with respect to matters relating to this Royalty Agreement

shall be the Courts of England.

THIS



AGREEMENT



EFFECTIVE



as



of



the



day



and year first above written.



LIBERTY TECHNICAL SERVICES LTD.

Per: /s/ Wade Cherwayko

------------------ABACAN INTERNATIONAL RESOURCE MANAGEMENT INC.

Per: /s/ Wade Cherwayko

-------------------4









EX-10.15

20



EXHIBIT 10.15

JOINT VENTURE AGREEMENT

between

YINKA FOLAWIYO PETROLEUM COMPANY LIMITED

and

LIBERTY TECHNICAL SERVICES LTD.

NIGERIAN OIL PROSPECTING LICENCE (OPL) 309



THIS JOINT VENTURE AGREEMENT

March, 1992 by and between:



is



made



and entered into as of the 9th day of



YINKA FOLAWIYO PETROLEUM COMPANY LIMITED, of 15th floor, Unity House, 37 Marina,

Lagos, Nigeria, (herein called "Owner/Operator")

- and LIBERTY TECHNICAL SERVICES LTD., of Suite 980 McFarlane Tower 700 Fourth Avenue

S.W., Calgary, Alberta, Canada, (herein called "Technical Partner")

WHEREAS

(a)



On June 26,1991, the Government

Concession to the Owner.



approved



the



allocation



of the



(b)



On February 21, 1992, the Owners and the Technical Partner agreed to

enter into a joint venture for the exploration and development of the

Concession.



NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter

set forth, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1

The terms defined in the recitals hereof or at other instances herein

shall have the meaning attributed to them thereby. In addition, the following

words and expressions shall, for the purpose of this Joint Venture Agreement,

bear the meanings respectively set opposite them:

"AFFILIATE" means a company, partnership or other legal entity which controls,

or is controlled by, or which is controlled by an entity which controls a Party.

Control means the ownership directly or indirectly of more than fifty percent

(50%) of the shares or voting rights in a company, partnership or legal entity;

"AGREEMENT" means

attached to this

"CONCESSION"



means



this Joint Venture Agreement

Joint Venture Agreement;

the



together



with the Exhibits



instrument concluded between The Ministry of Petroleum



Resources, Federal Government

renewal or amendment thereof



of Nigeria and the Owner and any extension,

agreed to in writing;



"CONCESSION AREA" means the area

Schedule "A" attached hereto;



covered



by the Concession as described in



- 1

"CONTROL" when used in relation to Affiliate, means holding with the power to

vote more than fifty percent (50%) of the outstanding voting securities or

interest of such Affiliate;

"COMMERCIAL

opinion of



QUANTITIES" means Hydrocarbons in such quantities which, in the

the Parties and the Government, will permit their being developed;



"COST OIL" means forty percent (40%) of the total production of Hydrocarbons

which is allocated to the Technical Partner for the recovery of Petroleum Costs;

"EFFECTIVE



DATE"



"GOVERNMENT"

Minister of



means



the



date



first



written



means the Federal Government

Petroleum Resources;



of



above;

Nigeria as represented by the



"HYDROCARBONS" means all substances including liquid and gaseous hydrocarbons

which are subject to and covered by this Joint Venture;

"MINIMUM WORK OBLIGATIONS" means those work

specified in the Concession Agreement which

satisfy the obligations as outlined in the



and/or expenditure obligations

must be performed in order to

concession agreement;



"PARTICIPATING INTEREST" means the undivided percentage interest of each Party

in the costs required to carry out the Work Program on the Concession pursuant

to this Joint Venture Agreement;

"PARTY" means a party to this Agreement and any successors or assigns, in

accordance with the provisions of this Agreement;

"PAYOUT" means that point where accumulated

Petroleum Cost, on the said concession;



Cost Oil is equal to the total



"PETROLEUM COSTS" means all costs and expenses incurred by the Parties both

within and without Nigeria in connection with the exploration, development and

operation of the Concession Area;

"PROFIT OIL" means Thirty percent (30%) of the total production of Hydrocarbons,

in excess of Cost Oil and Tax Oil, which is allocated to the Parties as herein

provided;

"RECOVERY OF PETROLEUM COSTS" means that point in time when Petroleum Costs have

been recovered out of Cost Oil as defined in Schedule "C";

"SCHEDULE



"C""



means



the



Operating



Agreement



attached



hereto.



"TAX OIL" means Thirty percent (30%) of the total production of Hydrocarbons

which is allocated to the Federal Government of Nigeria as payment of all

royalties and taxes;

- 2

"WORK PROGRAM" means the work program and budget attached hereto as Schedule "B"

for operations to be carried out on the Concession prepared by the technical

partner and approved by the owners and the Government.

1.2

herein



All other terms specifically defined in the Concession and not defined

shall have the meanings assigned to them in the Concession unless the



context clearly requires otherwise. In addition, where the context requires,

the singular shall include the plural and the plural shall include the singular.

ARTICLE II

GOVERNMENT APPROVAL

2.1

the



Upon execution of this Agreement, the Owner shall obtain the approval of

Government to the terms of this Agreement.



2.2

The Owner will provide the Technical Partners with evidence that it is

the holder of the Concession and that the Concession is in good standing with

the Government as of the Effective Date. Owner will supply the Technical

Partner with a copy of the Concession Agreement and any amendments and

correspondence relating thereto together with copies of all geological,

geophysical and other technical data which the Owner has in its possession

relating to the Concession Area.

2.3

term



of



And Owner shall maintain said Concession in good standing throughout the

this agreement.

ARTICLE III

EXPLORATION PERIOD



3.1

The Owner/Operator will have the right to carry out an exploration

program on the Concession Area in accordance with the Work Program which will be

sufficient to meet the Minimum Work Obligations under the Concession Agreement.

3.2

the



All costs incurred

Technical Partners.



in carrying out the Work Program shall be borne by

ARTICLE IV

DEVELOPMENT PERIOD



4.1

In the event Hydrocarbons are discovered in Commercial Quantities on the

Concession Area, the owners on behalf of the Parties shall apply to the

Government for an Oil Mining Lease in accordance with the applicable Government

regulations.

- 3

ARTICLE V

PARTICIPATING INTERESTS

5.1

Payout



All costs incurred in

shall be as follows:



Owners

Technical



partner



5.2

All costs

payout, shall be

Owners

Technical



0%

100%



incurred in

as follows:



partner



operating and developing the concession before



operating



and developing the concession after



60%

40%



5.3

In the event the Government elects to exercise its right to participate

in the development of the Concession Area, the Participating Interests will be

amended accordingly.

ARTICLE VI

ALLOCATION OF PRODUCTION

6.1

All Hydrocarbons produced from the Concession Area shall be allocated as

follows:



(a)



Prior to Payout:

COST OIL

---------



TAX OIL

--------



PROFIT OIL

-----------



Technical Partner



40%

---------



0%

--------



15%

-----------



Owner



0%

---------



0%

--------



15%

-----------



Government



0%

---------



30%

--------



0%

-----------



COST OIL

---------



TAX OIL

--------



PROFIT OIL

-----------



Technical Partner



0%

---------



0%

--------



28%

-----------



Owner



0%

---------



0%

--------



42%

-----------



Government



0%

---------



30%

--------



0%

-----------



(b)



After Payout:



- 4

ARTICLE VII

ASSIGNMENT

7.1

This Agreement and all the provisions hereof shall be binding upon and

enure to the benefit of the respective parties hereto and their respective

successors and assigns but neither this Agreement nor any of the rights,

interests or obligations hereunder or under the Concession shall be assigned by

any Party without the prior written consent of the other Party, and the Nigerian

Government if necessary, but may be assigned to Affiliates without such consent

subject to the provisions of this Agreement.

ARTICLE VIII

OPERATING AGREEMENT

8.1

with

copy



All operations on the Concession Area shall be carried out in accordance

the provisions of a Model Form International Operating Agreement 1990, a

of which is attached hereto as Schedule "C".



8.2

said



All working interest parties to the said concession will be subject to

Operating Agreement.

ARTICLE IX

APPLICABLE LAW AND DISPUTE RESOLUTION



9.1

This Agreement shall be governed by, construed, interpreted and applied

in accordance with the laws of the United Kingdom.

9.2

Any dispute arising out of and relating to this Agreement and which the

Parties have not settled by themselves, shall finally be decided, to the

exclusion of the courts, by arbitration in accordance with the arbitration rules

of the International Chamber of Commerce. Three arbitrators shall be appointed,



each Party appointing one arbitrator, and the two arbitrators thus appointed

choosing the presiding arbitrator. In reaching a decision, the arbitrators

shall act ex aequo et bono and shall be guided primarily by the terms of this

Agreement and International practice in similar agreements.

ARTICLE X

TERM

10.1

This Agreement shall remain in force and effect until all materials,

equipment and personal property used or obtained hereunder have been disposed of

and final settlement of all payments due under the terms of this Agreement have

been made among the Parties. Thereafter, this Agreement shall terminate upon

the occurrence of the earliest of the events described below:

(a)



It is terminated by unanimous written consent of the Parties;



(b)



The date on which all

Party;



(c)



The expiration or termination of the Concession Agreement,

any leases granted therefrom and any extensions thereof;



interests in



production



become



vested in one

including



- 5

(d) Fifty years from the date hereof.

ARTICLE XI

MISCELLANEOUS

11.1

In the event any provisions of this agreement conflict with the

provisions of the Concession or the operating agreement referred to in Article

VIII, the Parties shall meet and attempt in good faith to negotiate and document

such changes in this Agreement as may be appropriate to make it conform to such

other documents.

11.2

This

the Parties.



Agreement may be amended only by a written instrument executed by



11.3

This Agreement supersedes any and all other agreements, oral or

written, among the Parties in respect of the subject matter of this Agreement.

11.4

Each of the Parties shall execute and deliver such other certificates,

agreements and other documents and take such other actions as may reasonably be

requested by the other Party in order to consummate or implement the

transactions contemplated by this Agreement.

11.5

All notices, requests, demands or other communications hereunder shall

be delivered by hand or sent by mail as appropriate or by facsimile, telex or

telegram to the Parties at the address provided below:

OWNERS:

- -------



TECHNICAL PARTNERS:

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



Yinka Folawiyo Petroleum Limited

Unity House (15th Floor)

37 Marina

P.O. Box 2288

Lagos

Nigeria



Liberty Technical Services

Attention: Earl B. Lewis

Suite 980 McFarlane Tower

700 Fourth Avenue S.W.

Calgary, Alberta

T2P 3J4

Ph. (403) 237-8263

Fax (403) 237-6245



Ltd.



ARTICLE XII

PAYMENTS

12.1

Upon written approval from the Federal Government of Nigeria, in order

to continue this Agreement, Technical Partner shall make the Owner the following

payments:

(a)



within 60 days of said approval

latter, [confidential] (US);



or May



31,1992



which



ever is the



- 6

(b)

(c)



and within 90 days of said approval or June 30,1992 which ever is the

latter, to pay an additional [confidential] (US);

[confidential] (US) within 30 days of conversion of this OPL to an Oil

Mining Lease.



IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by

their duly authorized officers and representatives as of the day and year first

written above.

YINKA

Per:



FOLAWIYO



PETROLEUM



COMPANY



LIMITED



/s/ Tunde Folawiyo

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



Per:

-------------------LIBERTY



TECHNICAL



SERVICES



Per:



/s/ Wade Cherwayko

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



LTD.



Per:

-------------------- 7

SCHEDULE "A"

CONCESSION MAP

(Insert



map)

- 8 -





SCHEDULE "B"

WORK PROGRAM - OPL 309











WORK DESCRIPTION

ESTIMATED TIMING

ESTIMATED COSTS

- ---------------------------------------- --------------------- ---------------EVALUATION OF EXISTING DATA

JUNE - JULY/92

$

200,000

- ---------------------------------------- --------------------- ---------------SHOOT NEW SEISMIC



AUGUST - DECEMBER/92

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



$

1,800,000

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



PROCESS DATA AND RE-MAP



JANUARY - FEBRUARY/93

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



$

200,000

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



PICK TWO LOCATIONS AND WORK UP LOGISTICS



MARCH - MAY/93

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



$

100,000

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



DRILL TWO TEST WELLS



JUNE - DECEMBER/93

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



$

12,800,000

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



DRILL TWO CONFIRMATION WELLS



JANUARY - DECEMBER/94

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



$

12,800,000

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



DEVELOP FIELD(S):

- - 18 WELLS

- - DESIGN AND INSTALL PRODUCTION

FACILITIES



1995 - 1997



$



100,000,000



1995 - 1998

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



$

24,000,000

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



TOTALS



1992 - 1998

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



$

151,900,000

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



CONTINUE EXPLORATION

CYCLE UNTIL BLOCK FULLY

DEVELOPED





1997 -



- 9

SCHEDULE "B"

INTERNATIONAL JOINT VENTURE OPERATING AGREEMENT

This



document is filed as Exhibit 10.16 to the Form 10-KSB dated March 1, 1999.

- 10 -











EX-10.16

21



EXHIBIT



10.16

INTERNATIONAL JOINT VENTURE OPERATING AGREEMENT



BETWEEN



LIBERTY TECHNICAL SERVICES LTD.



YINKA FOLAWIYO PETROLEUM COMPANY LIMITED



AGREEMENT COVERING:



CONCESSION BLOCK 309





TABLE OF CONTENTS

ARTICLE

PAGE

- ---------------------------------------------------------------- ---ARTICLE I

DEFINITIONS



-1-



ARTICLE II

EFFECTIVE DATE AND TERM



-7-



ARTICLE III

PARTICIPATING INTEREST

3.1

Participating Interest

3.2

Ownership, Obligations and Liabilities

3.3

Government Participation



-7-7-8-8-



ARTICLE IV

PROJECT MANAGER

4.1 Designation of Project Manager

4.2 Rights and Duties of Project Manager

4.3 Employees of Operator

4.4 Information Supplied by Operator

4.5 Settlement of Claims and Lawsuits

4.6 Liability of Operator

4.7 Insurance Obtained by Operator

4.8 Commingling of Funds

4.9 Resignation of Operator

4.10 Removal of Operator

4.11 Appointment of Successor



-9-9-9-11-11-12-13-14-15-16-16-17-



ARTICLE V

OPERATING COMMITTEE

5.1 Establishment of Operating Committee

5.2 Powers and Duties of Operating Committee

5.3 Authority to Vote

5.4 Subcommittees

5.5 Notice of Meeting

5.6 Contents of Meeting Notice

5.7 Location of Meetings

5.8 Operator's Duties for Meetings

5.9 Voting Procedure

5.10 Record of Votes

5.11 Minutes

5.12 Voting by Notice

5.13 Effect of Vote



-18-18-18-19-19-19-19-20-20-20-20-20-21-21-



i





ARTICLE VI

WORK PROGRAMS AND BUDGETS

6.1 Exploration and Appraisal

6.2 Development

6.3 Production

6.4 Itemization of Expenditures

6.5 Contract Awards

6.6 Authorization for Expenditure ("AFE") Procedure

6.7 Overexpenditures of Work Programs and Budgets



-22-22-24-25-25-25-27-28-



ARTICLE VII

OPERATIONS BY LESS THAN ALL PARTIES

7.1 Limitation on Applicability

7.2 Procedure to Propose Exclusive Operations

7.3 Responsibility for Exclusive Operations

7.4 Consequences of Exclusive Operations

7.5 Premium to Participate in Exclusive Operations

7.6 Order of Preference of Operations

7.7 Stand By Costs

7.8 Special Considerations Regarding Deepening and Sidetracking

7.9 Miscellaneous



-28-28-29-32-32-36-39-40-40-41-



ARTICLE VIII

DEFAULT

8.1 Default and Notice

8.2 Operating Committee Meetings and Data

8.3 Allocation of Defaulted Accounts

8.4 Transfer of Interest

8.5 Continuation of Interest

8.6 Abandonment

8.7 Sale of Hydrocarbons

8.8 No Right of Set Off



-42-42-43-43-44-45-45-45-46-



ARTICLE IX

DISPOSITION OF PRODUCTION

9.1 Right and Obligation to Take In Kind

9.2 Offtake Agreement for Crude Oil

9.3 Separate Agreement for Natural Gas



-46-46-46-47-



ARTICLE X

ABANDONMENT OF WELLS

10.1 Abandonment of Wells Drilled as Joint Operations

10.2 Abandonment of Exclusive Operations



-48-48-49-



ARTICLE XI

SURRENDER, EXTENSIONS AND RENEWALS

11.1 Surrender

11.2 Extension of the Term



-49-49-49-



ARTICLE XII

TRANSFER OF INTEREST OR RIGHTS

12.1 Obligation

12.2 Rights



-50-50-53-



ARTICLE XIII

WITHDRAWAL FROM AGREEMENT

13.1 Right of Withdrawal

13.2 Partial or Complete Withdrawal

13.3 Voting

13.4 Obligations and Liabilities

13.5 Emergency

13.6 Assignment

13.7 Approvals

13.8 Abandonment Security

13.9 Withdrawal or Abandonment by all Parties



-53-53-54-54-55-55-55-55-56-57-



ii



ARTICLE XIV

RELATIONSHIP OF PARTIES AND TAX

14.1 Relationship of Parties

14.2 Tax

14.3 United States Tax Election



-57-57-57-58-



ARTICLE XV

CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY

15.1 Confidential Information

15.2 Continuing Obligations

15.3 Proprietary Technology

15.4 Trades



-59-59-60-60-60-



ARTICLE XVI

FORCE MAJEURE

16.1 Obligations

16.2 Definition of Force Majeure



-60-60-61-



ARTICLE XVII

NOTICES



-61-



ARTICLE XVIII

APPLICABLE LAW AND DISPUTE RESOLUTION

18.1 Applicable Law

18.2 Dispute Resolution



-62-62-62-



ARTICLE XIX

ALLOCATION OF COST RECOVERY RIGHTS

19.1 Allocation of Total Production

19.2 Allocation of Cost Oil

19.3 Allocation of Profit Oil

19.4 Allocation of Excess Cost Oil



-65-65-65-65-65-



ARTICLE XX

GENERAL PROVISIONS

20.1 Conflicts of Interest

20.2 Public Announcements

20.3 Successors and Assigns

20.4 Waiver

20.5 Severance of Invalid Provisions

20.6 Modifications

20.7 Headings

20.8 Singular and Plural

20.9 Gender

20.10 Counterpart Execution

20.11 Entirety



-66-66-66-67-67-67-67-67-67-68-68-68-



Exhibit



"A"



-



Accounting



Exhibit



"B"



-



Contract



Procedure

Area

iii





PROJECT MANAGEMENT AGREEMENT [SIC]

THIS



AGREEMENT



is



made



as



of



the



YINKA FOLAWIYO PETROLEUM COMPANY

company incorporated in Nigeria



Effective

LIMITED,



Date

a



among



(hereinafter



referred



to



as



"Owner");

and



LIBERTY TECHNICAL SERVICES LTD.,

incorporated in Calgary, Canada

(hereinafter



referred



to



as



a



company



"Project



Above may sometimes individually

collectively as the "Parties".



be



Manger");

referred



to



as



"Party"



and



WITNESSETH

WHEREAS, the Parties have entered into a Project Management Agreement

(hereinafter referred to as "Agreement") covering certain areas located in the

Nigeria Concession 309, referred to as the Concession Area, and more

particularly described in Exhibit "B" to this Agreement; and

WHEREAS, the

with respect



Parties desire to define their respective rights and obligations

to their operations under the Concession.



NOW THEREFORE, in consideration of the premises and the mutual covenants and

agreements and obligations set out below and to be performed, the Parties agree

as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following words and terms shall have the meaning

ascribed to them below:

1.1

forth

1.2



ACCOUNTING PROCEDURE means the

and contained in Exhibit A to

AFE



means



an



authorization



rules, provisions and conditions set

this Agreement.



for



expenditure pursuant to Article 6.6.





1.3

AFFILIATE means a company, partnership or other legal entity which

controls, or is controlled by, or which is controlled by an entity which

controls a Party. Control means the ownership directly or indirectly of

Check one Alternative

[ ]



ALTERNATIVE

more



[X]



than



NO.



1



fifty



(50)



ALTERNATIVE



NO.



fifty



percent



of the

entity.



(50)



shares



percent



2



or



or



more



voting



rights,



in a company, partnership or legal



1.4

AGREED INTEREST RATE means interest compounded on a monthly basis, at

the rate per annum equal to the one (1) month term, LIBOR rate for U.S. Dollar

deposits, as published by The Wall Street Journal or if not published, then by

----------------------the Financial Times of London, plus TWO percent (2%), applicable on the first

-------------------------Business Day prior to the due date of payment and thereafter on the first

Business Day of each succeeding one (1) month term. 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.



1.5

this



AGREEMENT

agreement.



means



this agreement, together with the Exhibits attached to



1.6

APPRAISAL WELL means any well whose purpose at the time of commencement

of drilling such well is the determination of the extent or the volume of

Hydrocarbon reserves contained in an existing Discovery.

1.7

BARREL means a quantity consisting of forty-two (42) United States

gallons, corrected to a temperature of sixty (60) degrees Fahrenheit under one

(1) atmosphere of pressure.

1.8

BUSINESS DAY means a day

customarily open for business.



on



which the banks in NEW YORK/LONDON are



1.9

CALENDAR QUARTER means a period of three (3) months commencing with

January 1 and ending on the following March 31, a period of three (3) months

commencing with April 1 and ending on the following June 30, a period of three

(3) months commencing with July 1 and ending on the following September 30, or a

period of three (3) months commencing with October 1 and ending on the following

December 31 according to the Gregorian Calendar.

1.10

CALENDAR YEAR

January 1 and ending

Calendar.



means a period of twelve (12) months commencing with

on the following December 31 according to the Gregorian





1.11

CASH PREMIUM means the payment made pursuant to Article 7.5(B) by a

Non-Consenting Party to reinstate its rights to participate in an Exclusive

Operation.

1.12

COMMERCIAL DISCOVERY means any discovery of Hydrocarbons which is

sufficient to entitle the Parties to apply for authorization from the Government

to commence exploitation.

1.13

COMPLETION means an operation intended to complete a well through the

Christmas tree as a producer of Hydrocarbons in one or more Zones including, but

not limited to, the setting of production casing, perforating, stimulating the

well and production Testing conducted in such operation. COMPLETE and other

derivatives shall be construed accordingly.

1.14

share



of



CONSENTING PARTY means a Party who agrees to participate in and pay its

the cost of an Exclusive Operation.



1.15

JOINT VENTURE AGREEMENT means the instrument concluded between Yinka

Folawiyo Petroleum Limited and the Parties identified in the second paragraph of

this Agreement and any extension, renewal or amendment thereof agreed to in

writing by the Parties.

1.16

CONCESSION AREA means as of the Effective Date the surface area which

is described in Exhibit B to this Agreement. The perimeter or perimeters of the

Concession Area shall correspond to that area covered by the Concession, as such

area may vary from time to time during the term of validity of the Concession.

1.17

COST OIL means that portion of the total production of Hydrocarbons

which is allocated to the Parties under the Concession for the recovery of

Petroleum Costs.

1.18



DAY



1.19



DEFAULTING



1.20

Zone



means



a



calender



PARTY



shall



day

have



unless

the



otherwise

meaning



specifically provided.



ascribed



in Article 8.1.



DEEPENING means an operation whereby a well is drilled to an objective

below the deepest Zone in which the well was previously drilled, or below



the deepest Zone

DEEPEN and other



proposed in the associated AFE, whichever is the deeper.

derivatives shall be construed accordingly.



1.21

DEVELOPMENT PLAN means a plan for the development, of Hydrocarbons from

an Exploitation Area covering all or a portion of the Contract Area.

1.22

DEVELOPMENT WELL

Hydrocarbons pursuant to



means any well drilled

a Development Plan.



for



the



production



of



1.23

DISCOVERY means the discovery of an accumulation of Hydrocarbons whose

existence until that moment was unknown.



Check

[X]



if



desired.



OPTIONAL



LANGUAGE



; provided Hydrocarbons are

conventional production test

1.24

stated



EFFECTIVE DATE

in Article II.



recovered at the surface in a flow measurable by

methods.



means



the



date



this



Agreement comes into effect as



1.25

ENTITLEMENT means a quantity of Hydrocarbons of which a Party has the

right and obligation to take delivery pursuant to the Contract or, if

applicable, an offtake agreement, and shall be derived from that Party's

Participating Interest in the Hydrocarbons produced after adjustment for

overlifts and underlifts.

1.26



EXCESS



COST



OIL



shall



have



the



meaning



ascribed in Article 19.4.



1.27

EXCLUSIVE OPERATION means those operations and activities carried out

by Operator, pursuant to this Agreement, the costs of which are chargeable to

the account of less than all the Parties. BUT WILL NOT BE DRILLED WITHIN 25 KM

OF EXISTING WELL CAPABLE OF PROD.

1.28



EXCLUSIVE WELL means a well drilled pursuant to an Exclusive Operation.



1.29

EXPLOITATION AREA means that part of the Concession Area which is

established pursuant to the Concession or if the Concession does not establish

an Exploitation Area, then that part of the Concession Area which is delineated

in a Development Plan approved as a Joint Operation or as an Exclusive

Operation.

1.30

EXPLOITATION PERIOD means

which the production and removal

Concession.

1.31

EXPLORATION

the Concession.



any and all periods of Exploitation during

of Hydrocarbons is permitted under the



PERIOD means any and all periods of exploration set out in



1.32

EXPLORATION WELL means any well drilled during the course of

exploration work other than an Appraisal Well or Development Well.

1.33

other



G & G DATA means only geological, geophysical and geochemical data and

information that is not obtained through a well bore.



1.34



GOVERNMENT



means



1.35



GOVERNMENT



OIL







the

COMPANY



government



of



Federal



Government of Nigeria.



means Nigeria National Petroleum Corporation.



1.36

GROSS NEGLIGENCE means any act or failure to act (whether sole, joint

or concurrent) by a Party which was intended to cause, or which was in reckless

disregard of or wanton indifference to, harmful consequences such Party knew, or

should have known, such act or failure would have had on the safety or property

of another person or entity, but shall not include any error of judgment or

mistake made by such Party in the exercise in good faith of any function,

authority or discretion conferred on the Party employing such under this

Agreement.

1.37

HYDROCARBONS means all

hydrocarbons which are subject



substances including liquid and gaseous

to and covered by the Concession.



1.38

IN KIND PREMIUM means the grant of interest in production made pursuant

to Article 7.5(C) by a Non-Consenting Party to reinstate its rights under an

Exclusive Operation.

1.39

JOINT ACCOUNT means the accounts maintained by Operator in accordance

with the provisions of this Agreement and of the Accounting Procedure for Joint

Operations.

1.40

JOINT OPERATIONS means those operations and activities carried out by

Operator pursuant to this Agreement, the costs of which are chargeable to all

Parties.

1.41

JOINT PROPERTY means, at

equipment, materials, information,

Account.



any point in time, all wells, facilities,

funds and the property held for the Joint



1.42

MINIMUM WORK OBLIGATIONS means those work and/or expenditure

obligations specified in the Contract which must be performed in order to

satisfy the obligations of the Contract.

1.43

NON-CONSENTING

Exclusive Operation.



PARTY means a Party who elects not to participate in an



1.44

NON-OPERATOR(S) means the Party or Parties to this Agreement other than

Operator.

1.45

Article



OPERATING

V.



COMMITTEE means the committee constituted in accordance with



1.46

OPERATOR means a Party

accordance with this Agreement.

1.47

PARTICIPATING

Party in the rights

Agreement.

1.48

PARTY

Agreement and

provisions of



1.49

allowed



to



this



Agreement



designated



as



such in



INTEREST means the undivided percentage interest of each

and obligations derived from the Contract and this



means any of the entities named in the first paragraph to this

any respective successors or assigns in accordance with the

this Agreement.



PETROLEUM COSTS means costs and expenses incurred by the Parties and

to be recovered pursuant to the Contract.



1.50

PLUGGING BACK means a single operation whereby a deeper Zone is

abandoned in order to attempt a Completion in a shallower Zone. PLUG BACK and

other derivatives shall be construed accordingly.

1.51

PROFIT OIL means that portion of the total production of Hydrocarbons,

in excess of Cost Oil, which is allocated to the Parties under the terms of the

Contract.



1.52

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. RECOMPLETE and other derivatives shall be construed

accordingly.

1.53

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, but are

not limited to, well stimulation operations, but exclude any routine repair or

maintenance work, or drilling, Sidetracking, Deepening, Completing,

Recompleting, or Plugging Back of a well. REWORK and other derivatives shall be

construed accordingly.

1.54

SENIOR SUPERVISORY PERSONNEL means any supervisory employee of a Party

who functions as:

Check

[X]



one



Alternative.



ALTERNATIVE



NO.



1



-



Field



Supervisor



Tier



Such Party's designated manager or supervisor who is responsible for, or in

charge of onsite drilling, construction or production and related operations, or

any other field operations; or

[ ]



ALTERNATIVE



NO.



2



-



Facility



Manager



Tier



Such Party's designated manager or supervisor of an onshore or offshore

installation or facility used for operations and activities of such Party, but

excluding all managers or supervisors who are responsible for or in charge of

onsite drilling, construction or production and related operations or any other

field operations; or

[ ]



ALTERNATIVE



NO.



3



-



Resident



Manager



Tier





Such Party's senior resident manager, who directs all operations and activities

of such Party in the country or region in which he is resident, but excluding

all managers or supervisors who are responsible for or in charge of

installations or facilities, onsite drilling, construction or production and

related operations, or any other field operations.

And, in any of the above alternatives, any employee of such Party who functions

at a management level equivalent to or superior to the tier selected, or an

officer or a director of such Party.

1.55

SIDETRACKING means the directional control and intentional deviation of

a well from vertical so as to change the bottom hole location unless done to

straighten the hole or to drill around junk in the hole or to overcome other

mechanical difficulties. SIDETRACK and other derivatives shall be construed

accordingly.

1.56

TESTING means an operation intended to evaluate the capacity of a Zone

to produce Hydrocarbons. TEST and other derivatives shall be construed

accordingly.

1.57

budget



WORK PROGRAM AND BUDGET means a work program for Joint Operations and

therefor as described and approved in accordance with Article VI.



1.58

ZONE means a stratum of earth containing or thought to contain a common

accumulation of Hydrocarbons separately producible from any other common

accumulation of Hydrocarbons.

[NOTE: Definitions contained in this Agreement must be compared and considered

against definitions under the Contract and under applicable laws and regulations



of



the



host



country.]

ARTICLE II

EFFECTIVE DATE AND TERM



2.1

This Agreement shall have effect from the 1st Day of March, 1992 and

shall, subject always to the Parties' continuing obligations under Article XV,

continue in effect until the Contract terminates or, otherwise until all

materials, equipment and personal property used in connection with the Joint

Operations have been removed and disposed of, and final settlement has been made

among the Parties.

For

and



the avoidance of doubt, portions of this Agreement as described in (A), (B)

(C) below shall remain in effect until:

(A) all wells have been properly

and



abandoned in



accordance



with Article X;



(B) all obligations, claims, arbitrations and lawsuits have been settled or

otherwise disposed of in accordance with Article 4.5 and Article XVIII; and

(C) the time relating to the protection of confidential information

proprietary technology has expired in accordance with Article XVI.



and





ARTICLE III

PARTICIPATING INTEREST

3.1



Participating



Interest



(A) The Participating Interests shall mean working interest as defined in

the Joint Venture Agreement of the Parties as of Effective Date are:









OWNER

BPO

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





APO



_____________________________



15%



42%



Technical Partners



55%



28%



_____________________________



__%



_____________________________





__%



(B) If a Party transfers all or part of its Participating Interest pursuant

to the provisions of this Schedule and the JVA, the Participating Interests

of the Parties shall be revised accordingly.

3.2



Ownership,



Obligations



and



Liabilities



(A) Unless otherwise provided in this Agreement, all the rights, and

interests in and under the Concession, all Joint Property and any

Hydrocarbons produced from the Concession Area shall, subject to the terms

of the Concession, be owned by the Parties in accordance with their

respective Participating Interests.

(B) Unless otherwise provided in this Schedule, the obligations of the

Parties under the Joint Venture Agreement and all liabilities and expenses



incurred by Technical Partner in connection with Joint Operations shall be

charged to the Joint Account and all credits to the Joint Account shall be

shared by the Parties, as among themselves, in accordance with their

respective Participating Interests.

(C) Unless otherwise provided in this Agreement, all liabilities incurred

by any Party in connection with Joint Operations shall be borne by the

Parties in accordance with their respective Participating Interests.

(D) Each Party shall pay when due, in accordance with the Accounting

Procedure, its Participating Interest share of Joint Account expenses,

including cash advances and interest, accrued pursuant to this Agreement.

Check



one





OPTIONAL



Alternative



if



desired.



PROVISION



3.3



Government



[X]



ALTERNATIVE



Participation

NO.



1



If Government Oil Company elects to participate in the rights and obligations of

Parties pursuant to Article ____ of the Contract, the Parties shall contribute,

in proportion to their respective Participating Interests, to the interest to be

acquired by Government Oil Company and shall execute such documents as may be

necessary to effect such transfer of interests and the joinder of Government Oil

Company as a party to this Agreement. All payments received for the transfer of

such interests shall be credited to the Parties in proportion to their

Participating Interests. UNDER NO CIRCUMSTANCES WILL THE TECHNICAL PARTNERS BE

LESS THAN 24%.

[ ]



ALTERNATIVE



NO.



2



If Government Oil Company elects to participate in the rights and obligation of

Parties pursuant to Article ____ of the Contract, the Parties shall contribute,

in proportion to their respective Participating Interests, to the interest to be

acquired by Government Oil Company and shall execute such documents as may be

necessary to effect such transfer of interests. The rights and obligations of

the Parties with respect to each other shall remain unchanged; however, they

shall enter into a separate operating agreement with Government Oil Company

with respect to the rights and obligations of Government Oil Company, on the one

hand, and the Parties on the other. All payments received for the transfer of

such interests shall be credited to the Parties in proportion to their

Participating Interests.

ARTICLE IV

PROJECT MANAGER

4.1



Designation



of



Project



Manager



ABACAN INTERNATIONAL is designed as Project Manager, and agrees to act as an

independent concessionor in accordance with the terms and conditions of the

Concession and this Agreement, which terms and conditions shall apply to any

successor Project Manager.

4.2



Rights



and



Duties



of



Project



Manager



(A) Subject to the terms and conditions of this agreement, Project Manager

shall have all the rights, functions and duties of Project Manager under

the Concession and shall have exclusive charge of and shall conduct all

Joint.

Project Managers may employ

independent

contractors and/or

operations agents in such Joint Operations.





(B) In the conduct of Joint Operations, Project Manager shall:

(1) Perform Joint Operations in accordance with the provisions of the

concession, this Agreement and the instructions of the Project

Management committee;

(2) Conduct all Joint Operations in a diligent, safe and efficient

manner in accordance with good and prudent oil filed practices and

conservation

principles generally followed by the international

petroleum industry under similar circumstances;

(3) Subject to Article 4.6, neither gain a profit nor suffer a loss as

a result of being the Project Manager in its conduct of Joint

Operations;

(4) Perform the duties for the Project Management Committee set out in

Article V, and prepare and submit to the Project Management Committee

the proposed Work Programs, budgets and AFE's as provided in

(5) Acquire all permits, consents, approvals, surface or other rights

that may be required for or in connection with the conduct of Joint

Operations;

(6) Permit the representatives of any of the Parties to have at all

reasonable times and at their own risk and expense reasonable access

to the Joint Operations with the right to observe all such Joint

Operations and to inspect all Joint Property and to conduct financial

audits as provided in the Accounting Procedure;

(7) Maintain the Contract in full force and effect. Operator shall

promptly pay and discharge all liabilities and expenses incurred in

connection with Joint Operations and use its reasonable efforts to

keep and maintain the Joint Property free from all liens, charges and

encumbrances arising out of Joint Operations;

(8) Pay to the Government for the Joint Account, within the periods

and in the manner prescribed by the Contract and all applicable laws

and regulations, all periodic payments, royalties, taxes, fees and

other payments pertaining to Joint Operations, but excluding any taxes

measured by the incomes of the Parties;

(9) Carry out the obligations of Operator pursuant to the Contract,

including, but not limited to, preparing and furnishing such reports,

records and information as may be required pursuant to the Contract;



(10) Have in accordance with the decisions of the Operating Committee,

the exclusive right and obligation to represent the Parties in all

dealings with the Government with respect to matters arising under the

Contract and Joint Operations. Operator shall notify the other Parties

as soon as possible of such meetings. Non-Operators shall have the

right to attend such meetings but only in the capacity of observers.

Nothing contained in this Agreement shall restrict any Party from

holding discussions with the Government with respect to any issue

peculiar to its particular business interests arising under this

Agreement, but in such event such Party shall promptly advise the

Parties, if possible, before and in any event promptly after such

discussions, provided that such Party shall not be required to divulge

to the Parties any matters discussed to the extent the same involve

proprietary information on matters not affecting the Parties; and

(11) Take all necessary and proper measures for the protection

life, health, the environment and property in the case of



of

an



emergency; provided, however, that Operator shall immediately notify

the Parties of the details of such emergency and measures.

Check



if



OPTIONAL



desired

PROVISION:



To



be



included



where



English



law



applies.



[ ]

(12) Include, to the extent practical,

in its contracts with

independent contractors and to the extent lawful, provisions which:

(a) ensure such contractors

against Operator;



can only



enforce



their



contracts



(b) permit Operator, on behalf of itself and Non-Operators, to

enforce contractual indemnities against, and recover loses and

damages suffered by them (insofar as recovered under their

contracts) from such contractors; and

(c) require such

Article 4.7(F).

4.3



Employees



of



contractors



to take



insurance



required



by



Operator



Subject to the Contract and this Agreement, Operator shall determine the number

of employees, the selection of such employees, the hours of work and the

compensation to be paid all such employees in connection with Joint Operations.

Operator shall employ only such employees, agents and contractors as are

reasonably necessary to conduct Joint Operations.

4.4



Information



Supplied



by



Operator



(A) Operator shall provide Non-Operators the following data and reports as

they are currently produced or compiled from the Joint Operations:

(1) Copies of all electrical logs or surveys;



(2) Daily drilling progress reports;

(3) Copies of all drill stem tests and care analysis report;

(4) Copies of the plugging reports;

(5) Copies of the final geological and geophysical maps and reports;

(6) Engineering studies, development

reports on development projects;

(7) Field and well performance

and reserve estimates;



reports,



schedules and annual progress

including



reservoir studies



(8) Copies of all reports relating to Joint Operations furnished by

Operator to the Government, except magnetic tapes which shall be

stored by Operator and made available for inspection and/or copying at

the sole expense of the Non-Operator requesting same;

(9) Other reports as frequently as is justified by the

as instructed by the Operating Committee; and



activities or



(10) Subject to Article 15.3, such additional

information for

Non-Operators as they or any of them may request, provided that the

requesting Party or Parties 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

Non-Operators who pay such costs shall receive such additional

information.

(B) Operator shall give Non-Operators access at all reasonable times to all

other data acquired in the conduct of Joint Operations. Any Non-Operator

may make copies of such other data at its sole expense.

4.5



Settlement



of



Claims



and



Lawsuits





(A) Operator shall promptly notify the Parties of any and all material

claims or suits and such other claims and suits as the Operating Committee

may direct which arise out of Joint Operations or relate in any way to

Joint Operations. Operator shall represent the Parties and defend or oppose

the claim or suit. Operator may in its sole discretion compromise or settle

any such claim or suit or any related series of claims or suits for an

amount not to exceed the equivalent of U.S. ___________________ Dollars

(U.S.$100,000.00), exclusive of legal fees. Operator shall obtain the

approval and direction of the Operating Committee on amounts in excess of

the above stated amount. Each Non-Operator shall have the right to be

represented by its own counsel at its own expense in the settlement,

compromise or defense of such claims or suits.

(B) Any Non-Operator shall promptly notify the other Parties of any claim

made against such Non-Operator by a third party relating to or which may

affect the Joint Operations and insofar as such claim relates to or affects

the Joint Operations such Non-Operator shall defend or settle the same in

accordance with any directions given by the Operating Committee and such

costs, expenses and damages as are payable pursuant to such defense or

settlement shall be for the Joint Account.

(C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party shall

have the right to participate in any such pursuit, prosecution, defense or

settlement conducted in accordance with Article 4.5(A) and Article 4.5(B)

at its sole cost and expense; provided always that no Party 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 Operations.

4.6



Liability



of



Operator



(A) Except as set out in this Article 4.6, the Party designated as Operator

shall bear no cost, expense or liability resulting from performing the

duties and functions of the Operator. Nothing in this Article shall,

however, be deemed to relieve the Party designated as Operator from any

cost, expense or liability for its Participating Interest share of Joint

Operations.

(B) The Parties shall be liable in proportion to their Participating

Interests and shall defend and indemnify Operator and its consultants,

agents, employees, officers and directors (the "Indemnitees") from any and

all costs, expenses (including reasonable attorneys' fees) and liabilities

incident to claims, demands or causes of action of every kind and character

brought by or on behalf of any person or entity for damage to or loss of

property or the environment, or for injury to, illness or death of any

person or entity, which damage, loss, injury, illness or death arises out

of or is incident to any act or failure to act by Indemnitees in the

conduct of or in connection with Joint Operations regardless of the cause

of such damage, loss, injury, illness or death and EVEN THOUGH CAUSED IN

WHOLE OR IN PART BY A PRE-EXISTING DEFECT, THE NEGLIGENCE (WHETHER SOLE,

JOINT OR CONCURRENT), GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL

FAULT OF OPERATOR (OR ANY SUCH AFFILIATE); provided that if any Senior



Supervisory Personnel of Operator,

engage in Gross Negligence that

proximately causes the Parties to incur cost, expense or liability for such

damage, loss, injury, illness or death, then:

Check



one



[ ]



Alternative.



ALTERNATIVE





Operator

[X]



shall



bear



ALTERNATIVE



Operator shall

replace and/or

[ ]



NO.



1



all

NO.



-



No



such

2



-



Limitation



costs,

Joint



expenses



Property



bear only the actual

remove Joint Property



ALTERNATIVE



NO.



3



-



and



liabilities.



Limitation



cost, expense and liability to repair,

so damaged or lost, if any.



Financial



Limitation



Operator shall bear only the first ____________________ (U.S. $ _________) of

such costs, expenses and liabilities.

[ ]



ALTERNATIVE



Operator



shall



NO.



still



4

bear



-



Complete

none



of



Limitation

such



costs,



expenses



and liabilities.



(C)

Notwithstanding the foregoing under no circumstances shall any

Indemnitee (except as a Party to the extent of its Participating Interest)

bear any cost, expense or liability for environmental, consequential,

punitive or any other similar indirect damages or losses, including but not

limited to those arising from business interruption, reservoir or formation

damage, inability to produce petroleum, loss of profits, pollution control

and environmental amelioration or rehabilitation.

4.7



Insurance



Obtained



by



Operator



(A) Operator shall procure and maintain or cause to be procured and

maintained for the Joint Account all insurance in the types and amounts

required by the Contract and applicable laws, rules and regulations.

(B) Operator shall obtain such further insurance, at competitive rates, as

the Operating Committee may from time to time require.

(C) Any Party may elect not to participate in the insurance to be procured

under Article 4.7(B) provided such Party:

(1) gives prompt written notice to that effect to Operator;

(2) does nothing which may interfere with Operator's

such insurance for the other Parties; and



negotiations for





(3) obtains and maintains such insurance (in respect of which an

annual certificate of adequate coverage from a reputable insurance

broker shall be sufficient evidence) or other evidence of financial

responsibility which fully covers its Participating Interest share of

the risks that would be covered by the insurance procured under

Article 4.7 (B), and which the Operating Committee may determine to be

acceptable. No such determination of acceptability shall in any way

absolve a non-participating Party from its obligation to meet each

cash call including any cash call in respect of damages and losses

and/or the costs of remedying the same in accordance with the terms of

this Agreement. If such Party obtains other insurance, such insurance



shall contain a waiver of subrogation in favor of all the other

Parties and the Operator, but only in respect of their interests under

this Agreement.

(D) The cost of insurance in which all the Parties are participating shall

be for the Joint Account and the cost of insurance in which less than all

the Parties are participating shall be charged to the Parties participating

in proportion to their respective Participating Interests.

(E) Operator shall, in respect of all insurance

Article:



obtained



pursuant to this



(1) promptly inform the participating Parties when such insurance is

obtained and supply them with copies of the relevant policies when the

same are issued;

(2) arrange for the participating Parties,

according to their

respective Participating Interests, to be named as co-insureds on the

relevant policies with waivers of subrogation in favor of all the

Parties; and

(3) duly file all claims and take all necessary and proper steps to

collect any proceeds and credit any proceeds to the participating

Parties in proportion to their respective Participating Interests.

(F) Operator shall use its reasonable efforts to require all contractors

performing work in respect of Joint Operations to obtain and maintain any

and all insurance in the types and amounts required by any applicable laws,

rules and regulations or any decision of the Operating Committee and shall

use its reasonable efforts to require all such contractors to name the

Parties as additional insureds on contractor's insurance policies or to

obtain from their insurers waivers of all rights or recourse against

Operator and Non-Operators.

4.8

Check



Commingling

one



[X]



of



Funds



Alternative.



ALTERNATIVE



NO.



1





Operator may commingle with its own funds the monies which it receives from or

for the Joint Account pursuant to this Agreement. Notwithstanding that monies

of a Non-Operator have been commingled with Operator's funds, the Operator shall

account to the Non-Operators for the monies of a Non-Operator advanced or paid

to Operator, whether for the conduct of Joint Operations or as proceeds from the

sale of production under this Agreement. Such monies shall be applied only to

their intended use and shall in no way be deemed to be funds belonging to

Operator.

Check



if



OPTIONAL



desired,



in



relation



to



Alternative



No.



1.



PROVISION



[ ]

Notwithstanding Article 4.8, the Operating Committee shall have the

right to require Operator to segregate from its own funds the monies which it

receives from or for the Joint Account pursuant to this Agreement.

Check



if



OPTIONAL

[ ]

right



desired,



in



relation



to



Alternative



No.



1.



PROVISION



Notwithstanding Article

to require Operator to



4.8, the

segregate



Operating Committee shall have the

from its own funds the monies which



Operator receives from

Exploitation Area.

[ ]



ALTERNATIVE



the



Parties



in



connection



with



operations on each



NO.2



Operator may not commingle with its own funds the monies which it receives from

or for the Joint Account pursuant to this Agreement.

4.9



Resignation



of



Operator



Subject to Article 4.11, Operator may resign as Operator at any time by so

notifying the other Parties at least one hundred and twenty (120) Days prior to

the effective date of such resignation.

4.10



Removal



of



Operator



(A) Subject to Article 4.11, Operator

notice from any Non-Operator if:



shall be removed



upon



receipt of



(1) An order is made by a court or an effective resolution is passed

for the dissolution, liquidation, winding up, or reorganization of

Operator;

(2) Operator

existence;



dissolves,



liquidates



(3) Operator becomes insolvent,

the benefit of creditors; or



or



terminates



its



corporate



bankrupt or makes an assignment for





(4) A receiver

assets.



is



appointed



for a



substantial



part of



Operator's



(B) Subject to Article 4.11, Operator may be removed by the decision of the

Non-Operators if Operator has committed a material breach of this Agreement

which Operator has failed to commence to rectify within thirty (30) Days of

receipt of a notice from Non-Operators detailing the alleged breach. Any

decision of Non-Operators to give notice of breach to Operator or to remove

Operator under this Article 4.10(B) shall be made by an affirmative vote of

_______ (2) or more of the total number of Non-Operators holding a combined

Participating Interest of at least _____________ percent (65%).

Check



if



OPTIONAL

[ ]



Check



desired.

PROVISION



(C) If Operator together with any Affiliate of Operator is or becomes the

holder of a Participating Interest of less than ___________________ percent

(____%), then Operator shall be required to promptly notify the other

Parties. The Operating Committee shall then vote within __________ (___)

Days of such notification on whether or not a successor Operator should be

named pursuant to Article 4.11.

if



desired.



OPTIONAL PROVISION

[X] (D) If there is a direct or indirect change in control of Operator (other

than a transfer of control to an Affiliate of Operator), Operator shall be

required to promptly notify the other Parties. 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 4.11. For purposes

of this Article, control means the ownership directly or indirectly of: 65%

Check



the



applicable



Alternative.



[ ]



ALTERNATIVE

more



[ ]



than



ALTERNATIVE

fifty

of



Check



if



the



NO.



1



fifty

NO.



percent

shares



percent



(50%)



2

(50%)

or



or



more



voting



rights



of



Operator.



desired.





OPTIONAL

[ ]



(E) Subject to Article 4.11, Operator may be removed at any time without

cause by the affirmative vote of _______________ (____) or more of the

total number of Non-Operators holding a combined Participating Interest of

at least _____________ percent (___%).



4.11

When



PROVISION



Appointment

a



change



of



of



Successor



Operator



occurs



pursuant



to Article 4.9 or Article 4.10:



(A) The Operating Committee shall meet as soon as possible to appoint a

successor Operator pursuant to the voting procedure of Article 5.9.

However, no Party may be appointed successor Operator against its will.

(B) If the Operator disputes commission of or failure to rectify a material

breach alleged pursuant to Article 4.10(B) and proceedings are initiated

pursuant to Article XVIII, no successor Operator may be appointed pending

the conclusion or abandonment of such proceedings.

(C) If an Operator is removed, other than in the case of Article 4.10(C) or

Article 4.10(D), neither Operator nor any Affiliate of Operator shall have

the right to vote for itself on the appointment of a successor Operator,

nor be considered as a candidate for the successor Operator.

(D) A 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 4.10(B).

(E) The Operating Committee shall arrange for the taking of an independent

inventory of all Joint Property and Hydrocarbons, and an audit of the books

and records of the removed Operator. Such inventory and audit shall be

completed, if possible, no later than the effective date of the change of

Operator. The liabilities and expenses of such inventory and audit shall be

charged to the Joint Account.

(F) The resignation or removal of Operator and its replacement by the

successor Operator shall not become effective prior to receipt of any

necessary governmental approvals.



(G) Upon the effective date of the resignation or removal, 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 Contract Area and to

Joint 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.



ARTICLE V

OPERATING COMMITTEE

5.1



Establishment



of



Operating



Committee



To provide for the overall supervision and direction of Joint Operations, there

is established an Operating Committee composed of representatives of each Party

holding a Participating Interest. Each Party shall appoint one (1)

representative and one (1) alternate representative to serve on the Operating

Committee. Each Party shall as soon as possible after the date of this

Agreement give notice in writing to the other Parties of the name and address of

its representative and alternate representative to serve an the Operating

Committee. Each Party shall have the right to change its representative and

alternate at any time by giving proper notice to such effect to the other

Parties.

5.2



Powers



and



Duties



of



Operating



Committee



The Operating Committee shall have power and duty to authorize and supervise

Joint Operations that are necessary or desirable to fulfill the Contract and

properly explore and exploit the Contract Area in accordance with this Agreement

and in a manner appropriate in the circumstances.

5.3



Authority



to



Vote



The representative of a Party, or in his absence his alternate representative,

shall be authorized to represent and bind such Party 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 Party 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 Party may also bring to any Operating

Committee meetings such technical and other advisors as it may deem appropriate.

5.4



Subcommittees



The Operating Committee may establish such subcommittees, including technical

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 Parties.

5.5



Notice



of



Meeting



(A) Operator may call a meeting of the Operating Committee by giving notice

to the Parties at least fifteen (15) Days in advance of such meeting.



(B) Any Non-Operator may request a meeting of the Operating Committee by

giving proper notice to all the other Parties. Upon receiving such request,

Operator shall call such meeting for a date not less than fifteen (15) Days

nor more than twenty (20) Days after receipt of the request.

(C) The notice periods above may only be waived with the unanimous

of all the Parties.

5.6



Contents



of



Meeting



consent



Notice



(A) Each notice of a meeting of the

Operator shall contain:



Operating



Committee



(1) The date, time and location of the meeting; and



as



provided by



(2) An agenda of the matters and

voted upon.



proposals



to be



considered



and/or



(B) A Party, by notice to the other Parties 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 Party, and with the unanimous consent of all

Parties, the Operating Committee may consider at a meeting a proposal not

contained in such meeting agenda.

5.7



Location



of



Meetings



All meetings of the Operating Committee shall be held in LONDON , ______________

or elsewhere as may be decided by the Operating Committee.

5.8



Operator's



Duties



for



Meetings



(A) With respect to meetings of the

Operating

Committee and

Subcommittee, Operator's duties shall include, but not be limited to:



any



(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.

(B) Operator shall have the right to appoint the chairman of the Operating

Committee and chairman of all subcommittees.



5.9



Voting



Procedure



Except as otherwise expressly provided in this Agreement, all decisions,

approvals and other actions of the Operating Committee on all proposals coming

before it under this Agreement shall be decided by the affirmative vote of

__________ (2) or more Parties, which are not Affiliates, then having

collectively at least ___________ percent (65%) of the Participating Interests.

5.10



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 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.

5.11



Minutes



The secretary shall provide each Party with a copy of the minutes of the

Operating Committee meeting within fifteen (15) Days after the end of the

meeting. Each Party shall have fifteen (15) Days after receipt of such minutes

to give notice of its objections to the minutes to the secretary. 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 5.10 shall take precedence over the minutes described

above.

5.12



Voting



by



Notice



(A) In lieu of a meeting, Operator may submit any proposal for a decision

of the Operating Committee by giving each representative proper notice

describing the proposal so submitted. Each Party shall communicate its vote



by proper notice to Operator and the other Parties within one of the

following appropriate time periods after receipt of Operator's notice:

(1) ____________ (24) hours in the case of operations which involve

the use of a drilling or completion rig that is standing by in the

Contract Area.

(2) ____________ (7) Days in the case of all other proposals.

Check



if



OPTIONAL

[ ]



AFEs



require



approval.



PROVISION

(3) ____________ (20) Days in the case of an AFE or supplemental AFE

if submitted for approval pursuant to Article 6.6(A).





(B) Except in the case of Article 5.12(A)(1), any Non-Operator may by

notice delivered to all Parties within _____________ ( 7 ) 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 X, any Party failing to communicate its

vote in a timely manner shall be deemed to have voted FOR such proposal.

(D) If a meeting is not requested, then at the expiration of the

appropriate time period, Operator shall give each Party a confirmation

notice stating the tabulation and results of the vote.

5.13



Effect



All decisions

be conclusive



of



Vote



taken by the Operating Committee pursuant to this Article, shall

and binding on all the Parties, except that:



(A) If pursuant to this Article, a Joint Operation, other than an operation

to fulfill the Minimum Work Obligations, has been properly proposed to the

Operating Committee and the Operating Committee has not approved such

proposal in a timely manner, then any Party shall have the right for the

appropriate period specified below to propose in accordance with Article

VII, an Exclusive Operation involving operations essentially the same as

those proposed for such Joint Operation.

(1) For proposals involving the use of a drilling rig that is standing

by in the Contract Area, such right shall be exercisable for

twenty-four (24) hours after the time specified in Article 5.12(A)(1)

has expired.

(2) For proposals to develop a Discovery, such right shall be

exercisable for ten (10) Days after the date the Operating Committee

was required to consider such proposal pursuant to Article 5.6 or

Article 5.12.

(3) For all other proposals, such right shall be exercisable for five

(5) Days after the date the Operating Committee was required to

consider such proposal pursuant to Article 5.6 or Article 5.12.



(B) If a Party voted against any proposal which was approved by the

Operating Committee and which could be conducted as an Exclusive Operation

pursuant to Article VII other than any proposal relating to Minimum Work

Obligations, then such Party shall have the right not to participate in the

operation contemplated by such approval. Any such Party wishing to exercise



its right of non-consent must give notice of non-consent to all other

Parties within five (5) Days (or within twenty-four (24) hours if the

drilling rig to be used in such operation is standing by in the Contract

Area) following Operating Committee approval of such proposal. The Parties

that were not entitled to give or did not give notice of non-consent shall

be Consenting Parties as to the operation contemplated by the Operating

Committee approval, and shall conduct such operation as an Exclusive

Operation under Article VII. Any Party that gave notice of non-consent

shall be a Non-Consenting Party as to such Exclusive Operation.

(C) If the Consenting Parties to an Exclusive Operation under Article

5.13(A) or Article 5.13(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.

ARTICLE VI

WORK PROGRAMS AND BUDGETS

6.1



Exploration



and



Appraisal



(A) Within ____________ (90) Days after the date of execution of this

Agreement, Operator shall deliver to the Parties a proposed Work Program

and Budget detailing the Joint Operations to be performed in the Contract

Area for the remainder of the current Calendar Year and, if appropriate,

for the following Calendar Year. Within _____________ (45) Days of such

delivery, the Operating Committee shall meet to consider and to endeavor to

agree on a Work Program and Budget.

(B) On or before the 1st of OCTOBER of each Calendar Year,

deliver to the Parties a proposed Work Program and Budget

Joint Operations to be performed in the Contract Area for

Calendar Year. Within forty-five (45) Days of such delivery,

Committee shall meet to consider and to endeavor to agree on

and Budget.



Operator shall

detailing the

the following

the Operating

a Work Program





(C) If a Discovery is made, Operator shall deliver any notice of Discovery

required under the Contract and shall as soon as possible submit to the

Parties 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,

Operator within __________ (20) Days, shall deliver to the Parties a

proposed Work Program and Budget for the appraisal of the Discovery. Within

__________ (10) Days of such delivery, or earlier if necessary to meet any

applicable deadline under the Contract, the Operating Committee shall meet

to consider, modify and then either approve or reject the appraisal Work

Program and Budget. If the appraisal Work Program and Budget is approved by

the Operating Committee, Operator shall take such steps as may be required

under the Contract to secure approval of the appraisal Work Program and

Budget by the Government and Government Oil Company. In the event the

Government or the Government Oil Company requires changes in the appraisa1

Work Program and Budget, the matter shall be resubmitted to the Operating

Committee for further consideration.

(D) The Work Program and Budget agreed pursuant to this Article shall

include the Minimum Work Obligations, or at least that part of such Minimum

Work Obligations required to be carried out during the Calendar Year in

question under the terms of the Contract. If within the time periods

prescribed in this Article the Operating Committee is unable to agree on

such Work Program and Budget, Operator shall take such actions, but only

such actions for the Joint Account as are necessary to maintain the

Contract in full force and effect, including the commencement of a Work

Program and Budget to fulfill the Minimum Work Obligations required for the



given Calendar Year.

(E) Subject to Article

which includes:



6.7,



approval of any such Work Program and Budget,



(1) an

Exploration

Well,

whether by

Sidetracking, shall include approval for:

Check

[ ]



one



drilling,



Deepening



or



Alternative.



ALTERNATIVE



NO.



1



-



No



Casing



Point



Election



All expenditures necessary for drilling, Testing and Completing such Exploration

Well.

[X]

apply



ALTERNATIVE NO. 2 - Casing Point Election - (This alternative shall not

where Minimum Work Obligations require Testing and Completing of a well.)



Only expenditures necessary for drilling and open-hole Testing of such well.

When an Exploration Well has reached its authorized depth, all logs, cores and

other approved tests have been conducted and the results furnished to the

Parties, Operator shall submit to the Parties in accordance with Article

5.12(A)(1) an election to participate in an attempt to Complete such well.

Operator shall include in such submission Operator's recommendation on such

Completion attempt and on AFE for such Completion Costs.

(2) an Appraisal Well, whether by drilling, Deepening or Sidetracking,

shall include approval for:

Check

[ ]



one



Alternative.



ALTERNATIVE



All expenditures

Well.



NO.



1



-



No



Casing



Point



Election



necessary for drilling, Testing and Completing such Appraisal





[X]

ALTERNATIVE NO. 2 - Casing Point Election - (This alternative shall not

apply where Minimum Work Obligations require Testing and Completing of a well.)

Only expenditures necessary for drilling, Sidetracking and open-hole Testing of

such well. When an Appraisal Well has reached its authorized depth, all logs,

cores and other approved tests have been conducted and the results furnished to

the Parties, Operator shall submit to the Parties in accordance with Article

5.12(A)(1) an election to participate in an attempt to Complete such well.

Operator shall include in such submission Operator's recommendation an such

Completion attempt and on AFE for such Completion Costs.

(F) Any Party desiring to propose a Completion attempt, or an alternative

Completion attempt, must do so within the time period provided in Article

5.12(A)(1) by notifying all other Parties. Any such proposal shall include

an AFE for such Completion Costs.

6.2



Development

(A) If the Operating Committee determines that a Discovery may be

commercial, the Operator shall, as soon as practicable, deliver to the

Parties a Development Plan together with the first annual Work Program and

Budget and provisional Work Programs and Budgets for the remainder of the

development of the Discovery, which shall contain, inter alia:

(1) Details of the proposed work 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 Exploitation Area; and

(4) Any other information requested by the Operating Committee.

(B) After receipt of the Development Plan, or earlier if necessary to meet

any applicable deadline under the Contract, the Operating Committee shall

meet to consider, modify and then either approve or reject the Development

Plan and the first annual Work Program and Budget for the development

submitted by Operator. If the Development Plan is approved by the Operating

Committee, Operator shall, as soon as possible, deliver any notice of

Commercial Discovery required under the Contract and take such other steps

as may be required under the Contract to secure approval of the Development

Plan by the Government and Government Oil Company. In the event the

Government or Government Oil Company 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, such work shall be incorporated

into and form part of annual Work Programs and Budgets, and Operator shall

on or before DEC. 1st of each Calendar Year submit a Work Program and

Budget for the Exploitation Area, for the following Calendar Year. Within

forty-five (45) Days after such submittal, the Operating Committee shall

endeavor to agree to such Work Program and Budget, including any necessary

or appropriate revisions to the Work Program and Budget for the approved

Development Plan.

6.3



Production



On or before the 1st day of DECEMBER each Calendar Year, Operator shall deliver

to the Parties a proposed production Work Program and Budget detailing the Joint

Operations to be performed in the Exploitation Area and the projected production

schedule for the following Calendar Year. Within forty-five (45) Days of such

delivery, the Operating Committee shall agree upon a production Work Program and

Budget.

6.4



Itemization



of



Expenditures



(A) During the preparation of the proposed Work Programs and Budgets and

Development Plans contemplated in this Article, Operator shall consult with

the Operating Committee regarding the contents of such Work Programs and

Budgets and Development Plans.

(B) Each Work Program and Budget and Development Plan submitted by Operator

shall contain an itemized estimate of the costs of Joint Operations and all

other expenditures to be made for the Joint Account during the Calendar

Year in question.

(C) The Work Program and Budget shall designate the portion or portions of

the Contract Area in which Joint Operations itemized in such Work Program

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.

6.5



Contract



Awards



Operator shall award

following basis (the







each contract for approved Joint Operations on the

amounts stated are in thousands of U.S. Dollars):









PROCEDURE A

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





PROCEDURE B

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





PROCEDURE C

-----------



Exploration and Appraisal Operations $

0 to $ $ _____ to $

- ------------------------------------ ------------ -----------Development Operations



$

0 to $

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



$ _____ to $

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



>$

---------->$

-----------



Production Operations

$

0 to $ $ _____ to $

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




>$

-----------



Procedure



(A) Intentionally deleted.

Procedure

(B) Operator shall:

(1) Provide the Parties with a list of the entities

proposes to invite to tender for the said contract;



whom



(2) Add to such list any entity whom a Party requests

within fourteen (14) Days of receipt of such list;



Operator



to be added



(3) Complete the tendering process within a reasonable period of time;

(4) Inform the Parties of the entities to whom the contract has been

awarded, provided that before awarding contracts to Affiliates of the

Operator

which exceed U.S.

Dollars

________________

(U.S. $

100,000.00), Operator shall obtain the approval of the Operating

Committee;

(5) Circulate to the Parties a competitive

reasons for the choice made; and



bid analysis



stating the



(6) Upon the request of a Party, provide such Party with a copy of the

final version of the contract awarded.

Procedure

(C) Operator shall:

(1) Provide the Parties with a list of the entities

proposes to invite to tender for the said contract;



whom



(2) Add to such list any entity whom a Party requests

within fourteen (14) Days of receipt of such list;



Operator



to be added



(3) Prepare and dispatch the tender documents to the entities on the

list as aforesaid and to Non-Operators;

(4) After the expiration of the period allowed for tendering, consider

and analyze the details of all bids received;



(5) Prepare and circulate to the Parties a competitive bid analysis,

stating Operator's recommendation as to the entity to whom the

contract should be awarded, the reasons therefore, and the technical,



commercial and contractual terms to be agreed upon;

(6) Obtain the approval of the Operating

bid; and



Committee to the recommended



(7) Upon the request of a Party, provide such Party with a copy of the

final version of the contract.

6.6



Authorization



for



Expenditure



("AFE")



Procedure



(A) Prior to incurring any commitment or expenditure, which is estimated to

be:

(1) In excess of U.S. Dollars ______________ (U.S.

exploration or appraisal Work Program and Budget;



$100,000.00) in an



(2) In excess of U.S. Dollars _______________ (U.S. $100,000.00) in a

development Work Program and Budget.; and

(3) In excess of U.S. Dollars _______________ (U.S. $100,000.00) in a

production Work Program and Budget.

Operator shall send to each Non-Operator an AFE containing Operator's best

estimate of the total funds required to carry out such work; the estimated

timing of expenditures, and any other necessary supportive information.

Notwithstanding the above, the Operator shall not be obliged to furnish an AFE

to the Parties before incurring any commitment or expenditures in connection

with the workover of the well or wells where such workover is pursuant to an

approved production Work Program and Budget.

Check



one



[ ]



Alternative.



ALTERNATIVE



NO.



1



(B) All AFE's shall be for informational purposes only and, provided

the work and the funds to be expended therefor are authorized in the

current Work Program and Budget, Operator shall not be required to

obtain approval for such AFE prior to commencement of work.

[X]



ALTERNATIVE

b.





Check if

OPTIONAL



NO.



2



Prior to expending any monies or incurring any commitments for

work, Operator shall obtain the approval of the Operating

Committee to such AFE.



desired.

PROVISION



[ ]

Any Party voting to disapprove an AFE issued in furtherance of an

approved Work Program and Budget shall demonstrate that such disapproval is duly

justified and shall state the reasons for such disapproval.

(C) The restrictions contained in this Article shall be without prejudice

to Operator's rights to make expenditures as set out in Article 4.2(B)(11)

and Article 13.5.

6.7



Overexpenditures



of



Work



Programs



and



Budgets



(A) For expenditures on any line item of an approved Work Program and

Budget,

Operator shall be entitled to incur without

furnishing a

supplemental AFE an overexpenditure for such line item up to ten percent

(10%) of the authorized amount for such line item; provided that cumulative



total of all overexpenditures for a Calendar Year shall not exceed

percent (5%) of the total Work Program and Budget in question.



five



(B) At such time that Operator is certain that the limits of Article 6.7(A)

will be exceeded, Operator shall furnish a supplemental AFE for the

estimated overexpenditures to the Operating Committee for its approval and

shall provide the Parties with full details of such overexpenditures.

Operator shall promptly give notice of the amounts of overexpenditures when

actually incurred.

ARTICLE VII

OPERATIONS BY LESS THAN ALL PARTIES

7.1



Limitation



on



Applicability



(A) No operations may be conducted in furtherance of the Contract except as

Joint Operations under Article V, or as Exclusive Operations under this

Article. No Exclusive Operation shall be conducted which conflicts with a

Joint Operation.

(B) Operations which are required to fulfill the Minimum Work Obligations

must be proposed and conducted as Joint Operations under Article V, and may

not be proposed or conducted as Exclusive Operations under this Article.



Check if

OPTIONAL



desired.

PROVISION



[X]

Except for Exclusive Operations relating to Deepening, Testing,

Completing, Sidetracking, Plugging Back, Recompletions or Reworking of a well

drilled to fulfill the Minimum Work Obligations, no Exclusive Operations may be

proposed or conducted until the Minimum Work Obligations for the then current

Contract period are fulfilled.

(C) No Party may propose or conduct an Exclusive Operation under this

Article, unless and until such Party has properly exercised its right to

propose an Exclusive Operation pursuant to Article 5.13, or is entitled to

conduct an Exclusive Operation pursuant to Article X.

(D) Subject to this

conducted as a Joint

approved Development

Operation.

7.2



Procedure



to



Article, any operation that may be proposed and

Operation, other than operations pursuant to an

Plan, may be proposed and conducted as an Exclusive



Propose



Exclusive



Operations



(A) Subject to Article 7.1, if any Party proposes to conduct an Exclusive

Operation, such Party shall give notice of the proposed operation to all

Parties, other than Parties who have relinquished their Participating

Interest in the Exploitation Area in which the proposed operation is to be

conducted. Such notice shall specify that such operation is proposed as an

Exclusive Operation,

the work to be performed,

the location, the

objectives, and estimated cost of such operation.

(B) Any Party entitled to receive such

participate in the proposed operation.



notice



shall have the right to



(1) For proposals to Deepen, Test, Complete, Sidetrack, Plug Back,

Recomplete or Rework involving the use of a drilling rig that is

standing by in the Contract Area, any such Party wishing to exercise

such right must so notify Operator within twenty-four (24) hours after

receipt of the notice proposing the Exclusive Operation.



(2) For proposals to develop a Discovery, any Party wishing to

exercise such right must so notify the Party proposing to develop

within twenty (20) Days after receipt of the notice proposing the

Exclusive Operation.

(3) For all other proposals, any such Party wishing to exercise such

right must so notify Operator within ten (10) Days after receipt of

the notice proposing the Exclusive Operation;



(C) Failure of a Party to whom a proposal notice is delivered to properly

reply within the period specified above shall constitute an election by

that Party not to participate in the proposed operation.

(D) If all Parties properly exercise their rights to participate, then the

proposed operation shall be conducted as a Joint Operation. The Operator

shall commence such Joint Operation as promptly as practicable and conduct

it with due diligence.

(E) If less than all Parties entitled to receive such

properly exercise their rights to participate, then:

Check

[X]



one



proposal



notice



Alternative.



ALTERNATIVE



NO.



1



(1) The Party proposing the Exclusive Operation, together with any

other Consenting Parties, shall have the right exercisable for the

applicable notice period set out in Article 7.2(B), to instruct

Operator

(subject to Article 7.9(G)) to conduct the Exclusive

Operation.

(2) If the Exclusive Operation is conducted, the Consenting Parties

shall bear the sole liability and expense of such Exclusive Operation

in a fraction, the numerator of which is such Consenting Party's

Participating Interest as stated in Article 3.1(A) and the denominator

of which is the aggregate of the Participating Interests of the

Consenting Parties as stated in Article 3.1(A), or in such other

proportion totaling one hundred percent (100%) of such liability and

expense as the Consenting Parties may agree.

(3) If such Exclusive Operation has not been commenced within

______________ (180) Days (excluding any extension specifically agreed

by all Parties or allowed by the force majeure provisions of Article

XVI), the right to conduct such Exclusive Operation shall terminate.

If any Party still desires to conduct such Exclusive Operation,

written notice proposing such operation must be resubmitted to the

Parties in accordance with Article V, as if no proposal to conduct an

Exclusive Operation had been previously made.

[ ]



ALTERNATIVE



NO.



2



(1) Immediately after the expiration of the applicable notice period

set out in Article 7.2(B), the Operator shall notify all Parties of

the names of the Consenting Parties and the recommendation of the

proposing Party as to whether the Consenting Parties should proceed

with the Exclusive Operation.



(2) Concurrently, Operator shall request the Consenting Parties to

specify the Participating Interest each Consenting Party is willing to

bear in the Exclusive Operation.



(3) Within twenty-four (24) hours after receipt of such notice, each

Consenting Party shall respond to the Operator stating that it is

willing to bear a Participating Interest in such Exclusive Operation

equal to:

(a) Only its Participating Interest as stated in Article 3.1(A);

(b) A fraction, the numerator of which is such Consenting Party's

Participating Interest as stated in Article 3.1(A) and the

denominator of which is the aggregate of the Participating

Interests of the Consenting Parties as stated in Article 3.1(A);

or

(c) The total of its Participating Interest as contemplated by

Article 7.2(E)(3)(b) plus all or any part of the difference

between one hundred

percent (100%) and the total of the

Participating

Interests subscribed by the other Consenting

Parties.

(4) Any Consenting Party failing to advise Operator within the

response period set out above shall be deemed to have elected to bear

the Participating Interest set out in Article 7.2(E)(3)(b) as to the

Exclusive Operation.

(5) If, within the response period set out above, the Consenting

Parties subscribe less than one hundred percent (100%) of the

Participating Interest in the Exclusive Operation, the Party proposing

such Exclusive Operation shall be deemed to have withdrawn its

proposal for the Exclusive Operation, unless within twenty-four (24)

hours of the expiry of the response period set out in Article

7.2(E)(3), the proposing Party notifies the other Consenting Parties

that the proposing Party shall bear the unsubscribed Participating

Interest.

(6) If one hundred percent (100%) subscription to the proposed

Exclusive Operation is obtained, Operator shall promptly notify the

Consenting Parties of their Participating Interests in the Exclusive

Operation.

(7) As soon as any Exclusive Operation is fully subscribed pursuant to

Article 7.2(E)(6) Operator (subject to Article 7.9(G)), shall commence

such Exclusive Operation as promptly as practicable and conduct it

with due diligence in accordance with this Agreement.



(8) If such Exclusive Operation has not been commenced within

____________ (180) Days (excluding any extension specifically agreed

by all Parties or allowed by the force majeure provisions of Article

XVI), the right to conduct such Exclusive Operation shall terminate.

If any Party still desires to conduct such Exclusive Operation,

written notice proposing such operation must be resubmitted to the

Parties in accordance with Article V, as if no proposal to conduct an

Exclusive Operation had been previously made.

7.3



Responsibility



for



Exclusive



Operations



(A) The Consenting Parties shall bear in accordance with the Participating

Interests agreed under Article 7.2(E) the entire cost and liability of

conducting an Exclusive Operation and shall indemnify the Non-Consenting

Parties from any and all costs and liabilities incurred incident to such

Exclusive Operation (included but not limited to all costs, expenses or

liabilities for environmental, consequential, punitive or any other similar

indirect damages or losses arising from business interruption, reservoir or

formation damage, inability to produce petroleum,

loss of profits,



pollution control and environmental amelioration or rehabilitation) and

shall keep the Contract Area free and clear of all liens and encumbrances

of every kind created by or arising from such Exclusive Operation.

(B) Notwithstanding Article 7.3(A), each Party shall continue to bear its

Participating Interest share of the cost and liability incident to the

operations in which it participated, including but not limited to plugging

and abandoning and restoring the surface location, but only to the extent

those costs were not increased by the Exclusive Operation.

7.4



Consequences



of



Exclusive



Operations



(A) With regard to any Exclusive Operation, for so long as a Non-Consenting

Party has the option to re-instate the rights it relinquished under Article

7.4(B) below, such Non-Consenting Party shall be entitled to have access

concurrently with the Consenting Parties, to all data and other information

relating to such Exclusive Operation, other than G & G Data obtained in an

Exclusive Operation. If a Non-Consenting Party desires to receive and

acquire the right to use such G & G Data, then such Non-Consenting Party

shall have the right to do so by paying to the Consenting Parties its

Participating Interest share as set out in Article 3.1(A) of the cost

incurred in obtaining such G & G Data.

(B) With regard to any Exclusive Operation and subject to Article 7.4(C)

(and Article 7.8, if selected) below, each Non-Consenting Party shall be

deemed to have relinquished to the Consenting Parties, and the Consenting

Parties shall be deemed to own, in proportion to their respective

Participating Interests in the Exclusive Operation:

(1) All of each such Non-Consenting Party's right to participate in

further operations on any Discovery made in the course of such

Exclusive Operation; and



(2) All of each such Non-Consenting Party's right pursuant to the

Contract to take and dispose of Hydrocarbons produced and saved:

(a) From the

conducted, and



well



in



which



such



Exclusive



Operation



was



(b) From any wells drilled to appraise or develop a Discovery.

(C) A Non-Consenting Party shall have the following and only the following

options to reinstate the rights it relinquished pursuant to Article 7.4(B):

(1) If the Consenting Parties decide to appraise a Discovery made in

the course of an Exclusive Operation, the Consenting Parties shall

submit to each Non-Consenting Party the approved appraisal program.

For thirty (30) Days (or forty-eight (48) hours if the drilling rig

which is to be used in such appraisal program is standing by in the

Contract

Area) from receipt of such appraisal

program,

each

Non-Consenting Party shall have the option to reinstate the rights it

relinquished pursuant to Article 7.4(B) and to participate in such

appraisal program. The Non-Consenting Party may exercise such option

by notifying Operator within the period specified above that such

Non-Consenting Party agrees to bear its Participating Interest share

of the expense and liability of such appraisal program, to pay the

lump sum amount as set out in Article 7.5(A) and to pay:

Check

[ ]

The



one



Alternative.



ALTERNATIVE

Cash



Premium



NO.

as



1

set



out



in



Article



7.5(B);



[ ]

The



ALTERNATIVE

In



[ ]



Kind



NO.



Premium



ALTERNATIVE



2

as



NO.



set



out



in



Article



7.5(C);



3



At the choice of the Non-Consenting Party exercising such option, either the

Cash Premium as set out in Article 7.5(B) or the In Kind Premium as set out in

Article 7.5(C).



(2) If the Consenting Parties decide to develop a Discovery made or

appraised in the course of an Exclusive Operation, the Consenting

Parties shall submit to the Non-Consenting Parties a Development Plan

substantially in the form intended to be submitted to the Government

under the Contract. For sixty (60) Days from receipt of such

Development Plan or such lesser period of time prescribed by the

Contract, each Non-Consenting Party shall have the option to reinstate

the rights it relinquished

pursuant to Article 7.4(B) and to

participate in such Development Plan. The Non-Consenting Party may

exercise such option by notifying the Party proposing to act as

Operator for such Development Plan within the period specified above

that such Non-Consenting Party agrees to bear its Participating

Interest share of the liability and expense of such Development Plan

and such future operating and producing costs, to pay the lump sum

amount as set out in Article 7.5(A) and to pay:

Check



one



[ ]

The



ALTERNATIVE

Cash



[ ]

The

[ ]



Alternative.



Premium



ALTERNATIVE

In



Kind



NO.

as



set



NO.



Premium



ALTERNATIVE



1



NO.



out



in



Article



7.5(B);



2

as



set



out



in



Article



7.5(C);



3



At the choice of the Non-Consenting Party exercising such option, either the

Cash Premium as set out in Article 7.5(B) or the In Kind Premium as set out in

Article 7.5(C).

(3) If the Consenting Parties decide to Deepen, Test, Complete,

Sidetrack, Plug Back, Recomplete or Rework an Exclusive Well and such

further operation was not included in the original proposal for such

Exclusive

Well,

the

Consenting

Parties shall submit to the

Non-Consenting Parties the approved AFE for such further operation.

For thirty (30) Days (or forty-eight (48) hours if the drilling rig

which is to be used in such operation is standing by in the Contract

Area) from receipt of such AFE, each Non-Consenting Party shall have

the option to reinstate the rights it relinquished pursuant to Article

7.4(B) and to participate in such operation. The Non-Consenting Party

may exercise such option by notifying the Operator within the period

specified above that such Non-Consenting Party agrees to bear its

Participating Interest share of the liability and expense of such

further operation, to pay the lump sum amount as set out in Article

7.5(A) and to pay:

Check

[X]



one



Alternative.



ALTERNATIVE



NO.



1



The



Cash



[ ]

The



Premium



ALTERNATIVE

In





[ ]



Kind



as

NO.



Premium



ALTERNATIVE



set



NO.



out



in



Article



7.5(B);



2

as



set



out



in



Article



7.5(C);



3



At the choice of the Non-Consenting Party exercising such option, either the

Cash Premium as set out in Article 7.5(B) or the In Kind Premium as set out in

Article 7.5(C).

(D) If a Non-Consenting Party does not properly and in a timely manner

exercise such option, including paying in a timely manner in accordance

with Article 7.5, all lump sum amounts and Cash Premiums, if any, due to

the Consenting Parties, such Non-Consenting Party shall have forfeited the

options as set out in Article 7.4(C) and the right to participate in the

proposed program, unless such program, plan or operation is materially

modified or expanded.

(E) A Non-Consenting Party shall become a Consenting Party with regard to

an Exclusive Operation at such time as the Non-Consenting Party gives

proper notice pursuant to Article 7.4(C); provided that such Non-Consenting

Party shall in no way be deemed to be entitled to any lump sum amount Cash

Premium or In Kind Premium paid incident to such Exclusive Operation. The

Participating Interest of such Non-Consenting Party in such Exclusive

Operation shall be its Participating Interest set out in Article 3.1(A).

The Consenting Party shall contribute in proportion to their respective

Participating Interests in such Exclusive Operation, the Participating

Interest of the Non-Consenting Party. If all Parties participate in the

proposed operation, then such operation shall be conducted as a Joint

Operation pursuant to Article V.

(F) If after the expiry of the period in which a Non-Consenting Party may

exercise its option to participate in a Development Plan the Consenting

Parties desire to proceed, the Party chosen by the Consenting Parties

proposing to act as Operator for such development, shall give notice to the

Government under the appropriate provision of the Contract requesting a

meeting to advise the Government that the Consenting Parties consider the

Discovery to be a Commercial Discovery. Following such meeting such

Operator for such development shall apply for an Exploitation Area (if

applicable in the Contract). Unless the Development Plan is materially

modified or expanded prior to the commencement of operations under such

plan, each Non-Consenting Party to such Development Plan shall:

(1) If the Contract so allows, elect not to apply for an Exploitation

Area covering such development and forfeit all interest in such

Exploitation Area, or

(2) If the Contract does not so allow, be deemed to have:

(a) Elected not to apply for an

development;



Exploitation



Area covering such



(b) Forfeited all economic interest in such Exploitation Area;



(c) Assumed a fiduciary duty to exercise its legal interest in

such Exploitation Area for the benefit of the Consenting Parties.

In either case such Non-Consenting Party shall be deemed to have withdrawn from

this Agreement to the extent it relates to such Exploitation Area, even if the

Development Plan is modified or expanded subsequent to the commencement of



operations

7.5



under



Premium



such

to



Development



Participate



in



Plan.

Exclusive



Operations



(A) Within thirty (30) Days of the exercise of its option under Article

7.4(C), each such Non-Consenting Party shall pay in immediately available

funds to the Consenting Parties who took the risk of such Exclusive

Operations in proportion to their respective Participating Interests in

such Exclusive Operations a lump sum amount payable in the currency

designated by such Consenting Parties. Such lump sum amount shall be equal

to such Non-Consenting

Party's Participating Interest share of all

liabilities and expenses, including overhead, that were incurred in every

Exclusive Operations relating to the Discovery, or well, as the case may

be, in which the Non-Consenting Party desires to reinstate the rights it

relinquished pursuant to Article 7.4(B), and that were not previously paid

by such Non-Consenting Party.

(B) In addition to Article 7.5(A), if a Cash Premium is due, then within

thirty (30) Days of the exercise of its option under Article 7.4(C) each

such Non-Consenting Party shall pay in immediately available funds, in the

currency designated by the Consenting Parties who took the risk of such

Exclusive Operations, to such Consenting Parties in proportion to their

respective Participating Interests a Cash Premium equal to the total of:

(1) _______________ percent (500%) of such Non-Consenting Party's

Participating

Interest share of all

liabilities and expenses,

including overhead, that were incurred in any Exclusive Operations

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 Party; plus

(2) ____________ percent ( 500%) of such Non-Consenting Party's

Participating

Interest share of all

liabilities and expenses,

including overhead, that were incurred in any Exclusive Operations

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

Party desires to reinstate the rights it relinquished pursuant to

Article

7.4(B),

and that were not

previously

paid by such

Non-Consenting Party; plus



(3) _____________ percent ( 500 %) of the Non-Consenting Party's

Participating

Interest share of all

liabilities and expenses,

including overhead, that were incurred in any Exclusive Operations

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 Party desires to reinstate the rights it relinquished

pursuant to Article 7.4(B), and that were not previously paid by such

Non-Consenting Party.

(C) In addition to Article 7.5(A), if an In-Kind Premium is due, each

Non-Consenting Party exercising its option under Article 7.4(C), shall be

deemed to grant to the Consenting Parties, and the Consenting Parties, in

proportion to their Participating Interests, shall be deemed to accept an

In Kind Premium, until such time as the In Kind Premium has been fully

satisfied. The In Kind Premium shall be the right to own, take in kind and

separately dispose of Hydrocarbons produced out of one hundred percent

(100%) of the Non-Consenting Party's Entitlement to future production

(including Cost Oil, Profit Oil and, where applicable under the Contract,

gas) from the

Exploitation

Area for the

Discovery in which the

Non-Consenting Party desires to reinstate the rights it relinquished

pursuant to Article 7.4(B)(2)(a) and (b) (or if applicable, from only the



well in which the Non-Consenting Party desires to reinstate the rights it

relinquished pursuant to Article 7.4(B)(2)(a)). The value in U.S. Dollars

of the In Kind Premium shall equal a total of:

(1) ___________ percent (500%) of such

Non-Consenting

Party's

Participating

Interest share of all

liabilities and expenses,

including overhead, that were incurred in any Exclusive Operations

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 Party; plus

(2) ___________ percent (500%) of such

Non-Consenting

Party's

Participating

Interest share of all

liabilities and expenses,

including overhead, that were incurred in any Exclusive Operations

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

Party desires to reinstate the rights it relinquished pursuant to

Article

7.4(B),

and that were not

previously

paid by such

Non-Consenting Party; plus

(3) ____________

percent (500%) of the Non-Consenting

Party's

Participating

Interest share of all

liabilities and expenses,

including overhead, that were incurred in any Exclusive Operations

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 Party desires to reinstate the rights it relinquished

pursuant to Article 7.4(B), and that were not previously paid by such

Non-Consenting Party; plus



(D) The In Kind Premium shall be deemed fully satisfied when the aggregate

value (determined in U.S. Dollars in accordance with Article 7.5(F)) of the

Hydrocarbons received by the Consenting Parties as In Kind Premium equals

the sum of the amounts calculated in U.S. Dollars pursuant to Article

7.5(C)). After such satisfaction the Consenting Parties' right to such In

Kind Premium shall terminate, and such Non-Consenting Party shall own, take

and dispose of its Entitlement from such Exploitation Area. Production from

other fields in the Contract Area, outside such Exploitation Area (whether

Cost Oil or Profit Oil) shall not be used to satisfy the In Kind Premium.

Any obligation of the Non-Consenting Party to satisfy the In Kind Premium

shall terminate with the cessation of production from the Exploitation Area

(or well, as the case may be) which the In Kind Premium encumbers, and in

such event, no cash payment, in lieu of production, shall be due from the

Non-Consenting Party for the unsatisfied balance of the In Kind Premium.

(E) Within ninety (90) Days after the Completion of any Exclusive

Operation, the Operator shall furnish to each Non-Consenting Party that has

granted an In Kind Premium in respect of such Exclusive Operation an

inventory of the equipment in and connected to the well, and an itemized

statement of the cost of such Exclusive Operation, including equipping the

well for production. Each Calendar Quarter during the period of satisfying

an In Kind Premium, Operator shall furnish to the Non-Consenting Parties

that have granted such In Kind Premium an itemized statement of all costs

and liabilities incurred in the Exclusive Operation(s), establishing the

value of such In Kind Premium together with a statement of the quantity of

Hydrocarbons produced to satisfy such In Kind Premium and the amount of

proceeds realized from the sale of such production during the preceding

Calendar Quarter.

(F) For the purpose of determining satisfaction of the In Kind Premium, the

value of the Hydrocarbons received by a Consenting Party as In Kind Premium

shall be the weighted average price per Barrel (f.o.b. the point of



delivery of the Cost Oil and Profit Oil to the Consenting Parties) which

such Consenting Party receives from the sale of such Hydrocarbons to

non-affiliated purchasers, in arms length transactions. For sales to

Affiliates, the price so used shall be the price at which Hydrocarbons of a

similar grade,

gravity and quality

(adjusted for differentials in

accordance with regularly established practice) were sold generally on

world markets, during the particular period of sale, in free and fair arms

length transactions,

with due adjustments being made for differing

geographical locations. Notwithstanding the fact that royalty or any other

payment obligation to the Government is based on an "official" or

"Government"

stated price,

the price used for calculation of the

satisfaction of the In Kind Premium shall be the price determined in

accordance with this Article.

(G) In determining the quantity of Hydrocarbons produced for purposes of

the In Kind Premium, the Consenting Parties shall use industry accepted

methods such as but not limited to metering or periodic well tests.



(H) During the period of time Consenting Parties are entitled to an In Kind

Premium, such Consenting Parties shall be responsible for the payment of

all royalties, charges, taxes, and all other burdens established by the

Contract directly related to such In Kind Premium.

(I) Any amount realized from the sale or other disposition of equipment,

which was acquired in connection with an Exclusive Operation, shall be

credited against the satisfaction of the In Kind Premium.

(J) On

satisfaction

of the In Kind Premium,

the right of such

Non-Consenting Party to own, take in kind and separately dispose of its

Entitlement granted under Article 7.5(C), shall be reinstated automatically

as of 7:00 a.m. on the Day following the Day on which such satisfaction

occurs.

7.6



Order



of



Preference



of



Operations



(A) Except as otherwise specifically provided in this Agreement, if any

Party desires to propose the conduct of an operation that will conflict

with an existing proposal for an Exclusive Operation, such Party shall have

the right exercisable for five (5) Days, or twenty-four (24) hours if the

drilling rig to be used is standing by in the Contract Area, from receipt

of the proposal for the Exclusive Operation, to deliver to all Parties

entitled to participate in the proposed operation such Party's alternative

proposal. Such alternative proposal shall contain the information required

under Article 7.2(A).

(B) Each Party receiving such proposals shall elect by delivery of notice

to Operator within the appropriate response period set out in Article

7.2(B) to participate in one of the competing proposals. Any Party not

notifying Operator within the response period shall be deemed not to have

voted.

(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, the Operator shall choose among the proposals receiving the

largest aggregate Participating Interest vote. Operator shall deliver

notice of such result to all Parties entitled to participate in the

operation within five (5) Days of the end of the response period, or

twenty-four (24) hours if the drilling rig to be used is standing by in the

Contract Area.

(D) Each Party shall then have two (2) Days (or twenty-four (24) hours if

the drilling rig to be used is standing by in the Contract Area) from

receipt of such notice to elect by delivery of notice to Operator whether



such Party will participate in such Exclusive Operation, or will relinquish

its interest pursuant to Article 7.4(B). Failure by a Party to deliver such

notice within such period shall be deemed an election not to participate in

the prevailing proposal.

Check



if



OPTIONAL



desired.

PROVISION





[ ] (E) Notwithstanding the provisions of Article 7.4(B), if for reasons other

than the encountering of granite or other practically

impenetrable

substance or any other condition in the hole rendering further operations

impracticable, a well drilled as an Exclusive 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 Party who

submitted or voted for an alternative proposal under this Article 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

Party shall have the option exercisable for forty-eight (48) hours from

receipt of such notice to participate in the initial proposed Completion of

such well. Each such Non-Consenting Party may exercise such option by

notifying the Operator that it wishes to participate in such Completion and

by paying its share of the cost of drilling such well to its actual depth,

calculated in the manner provided in Article 7.8(B)(1). If any such

Non-Consenting Party does not properly elect to participate in the first

Completion proposed for such well, the relinquishment provisions of Article

7.4(B) shall continue to apply to such Non-Consenting Party's interest.

7.7



Stand



By



Costs



(A) When an operation has been performed, all tests have been conducted and

the results of such tests furnished to the Parties, stand by costs incurred

pending response to any Party's notice proposing an Exclusive Operation for

Deepening, Testing, Sidetracking, Completing, Plugging Back, Recompleting,

Reworking or other further operation in such well (including the period

required under Article 7.6 to resolve competing proposals) shall be charged

and borne as part of the operation just completed. Stand by costs incurred

subsequent to all Parties responding, or expiration of the response time

permitted, whichever first occurs, shall be charged to and borne by the

Parties

proposing the

Exclusive

Operation in proportion to their

Participating Interests, regardless of whether such Exclusive Operation is

actually conducted.

(B) If a further operation is proposed while the drilling rig to be

utilized is on location, any Party may request and receive up to five (5)

additional Days after expiration of the applicable

response period

specified in Article 7.2(B) within which to respond by notifying Operator

that such Party agrees to bear all stand by costs and other costs incurred

during such extended response period. Operator may require such Party to

pay the estimated stand by time in advance as a condition to extending the

response period. If more than one Party requests such additional time to

respond to the notice, stand by costs shall be allocated between such

Parties an a Day-to-Day basis in proportion to their Participating

Interests.

Check



if



desired.



[ ]



OPTIONAL



7.8

1.1





Special



PROVISION

Considerations



(A) An Exclusive



Regarding



Deepening



Well shall not be Deepened or



and



Sidetracking



Sidetracked



without first



affording the Non-Consenting Parties in accordance

opportunity to participate in such operation.



with this Article the



(B) In the event any Consenting Party desires to Deepen or Sidetrack an

Exclusive Well, such Party shall initiate the procedure contemplated by

Article 7.2. If a Deepening or Sidetracking operation is approved pursuant

to such provisions, and if any Non-Consenting Party to the Exclusive Well

elects to participate in such Deepening or Sidetracking operation, the

payment, if any, pursuant to Article 7.5 of such Non-Consenting Party shall

be calculated based on the following liabilities and expenses:

(1) If the proposal is to Deepen or Sidetrack and is made prior to the

Completion of such well as a Commercial Discovery, then payment shall

be based on such Non-Consenting Party's Participating Interest share

of the liabilities and expenses incurred in connection with drilling

the Exclusive Well from the surface to the depth previously drilled

which

such

Non-Consenting

Party

would

have

paid had such

Non-Consenting Party agreed to participate in such Exclusive Well,

plus the Non-Consenting Party's Participating Interest share of the

liabilities and expenses of Deepening or

Sidetracking

and of

participating in any further operations on such Exclusive Well in

accordance with the other provisions of this Agreement; provided,

however, all liabilities and expenses for Testing and Completing or

attempting Completion of the well incurred by Consenting Parties prior

to the commencement of actual operations to Deepen or Sidetrack beyond

the depth previously drilled shall be for the sole account of

Consenting Parties in the proportion their Participating Interest

bears to the aggregate of their Participating Interests.



(2) If the proposal is to Deepen or Sidetrack and is made for an

Exclusive Well that has been previously Completed as a Commercial

Discovery, but is no longer producing, then payment shall be based on

the Non-Consenting Party's Participating Interest share of all costs

of drilling and Completing said well from the surface to the depth

previously drilled, calculated in the manner provided in Article

7.8(B)(1), less those costs recouped by the Consenting Parties from

the sale of production

from such

Exclusive

Well,

plus the

Non-Consenting Party's Participating Interest share of all costs of

re-entering said well, plus the Non-Consenting Party's proportionate

part

(based on the

percentage

of the

Exclusive

Well such

Non-Consenting Party would have owned had it previously participated

in such Exclusive Well) of the costs of salvable materials and

equipment remaining in the hole and salvable surface equipment used in

connection with such well shall be determined in accordance with the

Accounting Procedure. If at the time such Deepening or Sidetracking

operation is conducted the Consenting Parties have recouped from the

Exclusive Well the amount calculated pursuant to Article 7.5, then a

Non-Consenting Party may participate in the Deepening or Sidetracking

of the Exclusive Well with no payment for liabilities and expenses

incurred prior to re-entering the well for Deepening or Sidetracking.

7.9



Miscellaneous

(A) Each Exclusive Operation shall be carried out by the Consenting Parties

acting as the Operating Committee, subject to the provisions of this

Agreement applied mutatis mutandis to such Exclusive Operation and subject

---------------to the terms and conditions of the Contract.

(B) The computation of liabilities and expenses incurred in Exclusive

Operations,

including the liabilities and expenses of Operator for

conducting such operations, shall be made in accordance with the principles

set out in the Accounting Procedure.



(C) Operator shall maintain separate books, financial records and accounts

for Exclusive 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. Said rights of audit and examination shall

extend to each of the Consenting Parties and each of the Non-Consenting

Parties so long as the latter are, or may be, entitled to elect to

participate in such operations.

(D) Operator, if it is not a Consenting Party and it is conducting an

Exclusive Operation for the Consenting Parties, 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 Operations until cash advances requested have been made, and the

Accounting Procedure shall apply to Operator in respect of any Exclusive

Operations conducted by it.

(E) Should the submission of a Development Plan be approved in accordance

with Article 5.9, or should any Party propose a development in accordance

with Article VII, with either proposal not calling for the conduct of

additional appraisal drilling, and should any Party wish to drill an

additional Appraisal Well prior to development, then the Party proposing

the Appraisal Well as an Exclusive Operation shall be entitled to proceed

first, but without the right to future reimbursement of costs or to any

Premium, pursuant to Article 7.5. If, as the result of drilling such

Appraisal Well as an Exclusive Operation, the Party proposing to apply for

an Exploitation Area decides to not develop the reservoir, then each

Non-Consenting Party who voted in favor of such Development Plan prior to

the drilling of such Appraisal Well shall pay to the Consenting Party the

amount such Non-Consenting Party would have paid had such Appraisal Well

been drilled as a Joint Operation.



(F) In the case of any Exclusive Operation for Deepening, Testing,

Completing, Sidetracking, Plugging Back, Recompleting or Rework, the

Consenting Parties shall be permitted to use, free of cost, all casing,

tubing and other equipment in the well, that is not needed for Joint

Operations, but the ownership of all such equipment shall remain unchanged.

On abandonment of a well after such Exclusive Operation, the Consenting

Parties shall account for all such equipment to the Parties who shall

receive their respective Participating Interest shares, in value, less cost

of salvage.

(G) If the Operator is a Non-Consenting Party to an Exclusive Operation to

develop a Discovery, then subject to obtaining any necessary Government

approval the Operator may resign, but in any event shall resign on the

request of the Consenting Parties, as Operator for the Exploitation Area

for such Discovery and the Consenting Parties shall select a Party to serve

as Operator.

ARTICLE 8

DEFAULT

8.1



Default



and



Notice



Any Party that fails to pay when due its Participating Interest share of Joint

Account expenses including cash advances and interest, accrued pursuant to this

Agreement (a "Defaulting Party") shall be in default under this Agreement.

Operator, or any other Party in the case of the default of Operator, shall

promptly give written notice of such default to such Party and each of the

non-defaulting Parties. The amount not paid by the Defaulting Party shall bear

interest from the date due until paid in full. Interest will be calculated

using the Agreed Interest Rate.



8.2



Operating



Committee



Meetings



and



Data



After any default has continued for five (5) Business Days from the date of

written notice of default under Article 8.1, and for as long thereafter as the

Defaulting Party remains in default on any payment due under this Agreement, the

Defaulting Party shall not be entitled to attend Operating Committee meetings or

to vote on any matter coming before the Operating Committee during the period

such default continues. Unless agreed otherwise by the non-defaulting Parties,

the voting interest of each non-defaulting Party shall be in the proportion

which its Participating Interest bears to the total of the Participating

Interests of all the non-defaulting Parties. Any matters requiring unanimous

vote of the Parties shall be deemed to exclude the Defaulting Party. After the

said five (5) Business Days and while the Defaulting Party remains in default as

aforesaid, the Defaulting Party shall not have access to any data or information

relating to Joint Operations, and non-defaulting Parties shall be entitled to

trade data without such Defaulting Party's consent and the Defaulting Party

shall have no right to any data received on such trade unless and until its

default is remedied in full. Notwithstanding the foregoing, the Defaulting

Party shall be deemed to have approved, and shall join with the non-defaulting

Parties in taking any action to maintain and preserve the Contract.

8.3



Allocation



of



Defaulted



Accounts





(A) Operator shall, either at the time of giving notice of default as

provided in Article 8.1, or by separate notice, notify each non-defaulting

Party the sum of money it is to pay as its portion (such portion being in

the ratio that each non-defaulting Party's Participating Interest bears to

the Participating Interests of all non-defaulting Parties) of such amount

in default. Each non-defaulting Party shall, if such default continues, pay

Operator, within five (5) Business Days after receipt of such notice, its

share of the amount which the Defaulting Party failed to pay. If any

non-defaulting Party fails to pay its share of the amount in default as

aforesaid, such non-defaulting Party shall thereupon be in default and

shall be a Defaulting Party subject to the provisions of this Article. The

non-defaulting Parties which pay the amount owed by any Defaulting Party

shall be entitled to receive their respective share of the principal and

interest payable by such Defaulting Party pursuant to Article 8.1.

(B) The total of all amounts paid by the non-defaulting Parties for the

Defaulting Party, together with interest accrued on such amounts shall

constitute a debt due and owing by the

Defaulting

Party to the

non-defaulting Parties in proportion to such amounts paid. In addition the

non-defaulting Parties may in the manner contemplated by this Article,

satisfy such debt (together with interest) and may accrue an amount equal

to the Defaulting Party's Participating Interest share of the estimated

cost to abandon any Joint Property.

(C) A Defaulting Party may remedy its default by paying to Operator the

total amount due, together with interest calculated as provided in Article

8.1, at any time prior to transfer of its interest pursuant to Article 8.4,

and upon

receipt of such

payment

Operator

shall remit to each

non-defaulting Party its proportionate share of such amount.

(D) The rights granted to each non-defaulting Party pursuant to this

Article, shall be in addition to, and not in substitution for any other

rights or remedies which each non-defaulting Party may have at law or

equity or pursuant to the other provisions of this Agreement.

8.4



Transfer





(A) For



of



thirty



Interest



(30) Days after each



failure by the



Defaulting



Party to



remedy its default by the thirtieth (30th) Day following notice of default

without prejudice to any other rights of the non-defaulting Parties to

recover the amounts paid for the Defaulting Party, together with interest

accrued on such amount, each non-defaulting Party shall have the option to

give notice to the Defaulting Party requiring the Defaulting Party to

transfer its interest to the non-defaulting Parties. To that end if any of

the non-defaulting Parties so elect, the Defaulting Party shall be deemed

to have transferred and to have empowered the electing non-defaulting

Parties to execute on said Defaulting Party's behalf any documents required

to effect a transfer, of all of its right, title and beneficial interest in

and under this Agreement and the Contract, and in all wells and Joint

Property to the electing non-defaulting Parties. If requested, each Party

shall execute a Power of Attorney in the form prescribed by the Operating

Committee. The Defaulting Party shall, without delay following any request

from the non-defaulting Parties, do any and all acts required to be done by

applicable law or regulation in order to render such transfer legally

valid, including, without limitation, the obtaining of all governmental

consents and approvals, and shall execute any and all documents and take

such other actions as may be necessary in order to effect prompt and valid

transfer of the interests

described above, free of all liens and

encumbrances. In the event all Government approvals are not timely

obtained, the Defaulting Party shall hold its Participating Interests in

trust for such non-defaulting Parties who elected to assume such Defaulting

Party's Participating Interest.

(B) In the absence of an agreement among the non-defaulting Parties to the

contrary, any such transfer to the non-defaulting Parties shall be in the

proportion that the non-defaulting Parties have paid the amounts due from

the Defaulting Party.

(C) Subject to Article 12.1(C), on the effective date of such transfer the

Defaulting Party shall forthwith cease to be a Party to this Agreement to

the extent of the Participating Interest so transferred. The acceptance or

non-acceptance by a non-defaulting Party of any portion of a Defaulting

Party's Participating Interest shall be without prejudice to any rights or

remedies such non-defaulting Parties have to recover the outstanding debts

(including interest) owed by the Defaulting Party.

8.5



Continuation



of



Interest



If within thirty (30) Days after each failure by the Defaulting Party to remedy

its default by the thirtieth (30th) Day following notice of default the

non-defaulting Parties elect to not acquire the Defaulting Party's Participating

Interest as provided in Article 8.4 and to continue to bear the Defaulting

Party's Participating Interest share of liabilities and expenses, then the

non-defaulting Parties shall accumulate all such liabilities and expenses as a

debt pursuant to Article VIII, but the Defaulting Party shall continue to be a

Party subject to Article 8.2 and Article 8.7. If Operator disposes of any Joint

Property or any other credit or adjustment is made to the Joint Account, or if

Operator sells any of the Defaulting Party's Participating Interest share of

Hydrocarbons, then, in respect of the Defaulting Party's Participating Interest

share of the proceeds of such disposal, credit or adjustment or sale, Operator

shall be entitled to retain and to set off the same against all amounts,

together with interest accrued on such amount, due and owing from the Defaulting

Party plus an accrued amount equal to the Defaulting Party's Participating

Interest share of the estimated cost to abandon any Joint Property. Any surplus

remaining after setting off the same as aforesaid shall be paid promptly to the

Defaulting Party.

8.6



Abandonment





If, within thirty (30) Days after the failure by the Defaulting Party to remedy

its default by the thirtieth (30th) Day as aforesaid, no non-defaulting Party



elects to acquire the Defaulting Party's Participating Interest as provided in

Article 8.4, or to bear the Defaulting Party's Participating Interest share of

liabilities and expenses as provided in Article 8.5, then no transfer shall be

made and Joint Operations shall be abandoned subject to any necessary consents

and notices being given, and each Party, including the Defaulting Party shall

pay its Participating Interest share of all costs of abandoning and

relinquishing the Contract. If abandonment occurs as aforesaid, all monies paid

by the non-defaulting Parties for the Defaulting Party pursuant to Article 8.3,

together with interest accrued on such amount, shall remain a debt due and owing

by the Defaulting Party.

8.7



Sale



of



Hydrocarbons



If a Party defaults after the commencement of commercial production and has not

remedied the default by the thirtieth (30th) Day as aforesaid, then, during the

continuance of such default, the Defaulting Party shall not be entitled to its

Participating Interest share of Hydrocarbons which shall vest in and be the

property of the non-defaulting Parties, and Operator shall be authorized to sell

such Hydrocarbons at the best price obtainable under the circumstances and,

after deducting all costs, charges and expenses incurred by Operator in

connection with such sale, pay the proceeds proportionately to the

non-defaulting Parties which proceeds shall be credited against all monies

advanced pursuant to Article 8.3, together with interest accrued thereon. Any

surplus remaining shall be paid to the Defaulting Party, and any deficiency

shall remain a debt due from the Defaulting Party to the non-defaulting Parties.

Notwithstanding any such sales by Operator the provisions of Article 8.4 shall

continue to apply.

8.8



No



Right



of



Set



Off



Each Party acknowledges and accepts that a fundamental principle of this

Agreement is that each Party pays its Participating Interest share of all

amounts due under this Agreement as and when required. Accordingly, any Party

which becomes a Defaulting Party undertakes that, in respect of either any

exercise by the non-defaulting Parties of any rights under or the application of

any of the provisions of this Article, such Party shall not raise by way of set

off or invoke as a defense, whether in law or equity, any failure to pay amounts

due and owing under this Agreement or any alleged or unliquidated claim that

such Party may have against Operator or any Non-Operator, whether such claim

arises under this Agreement or otherwise. Such Party further undertakes not to

raise by way of defense, whether in law or in equity, that the nature or the

amount of the remedies granted to the non-defaulting Parties is unreasonable or

excessive.

ARTICLE IX

DISPOSITION OF PRODUCTION

9.1



Right



and



Obligation



to



Take



In



Kind





Except as otherwise provided in this Article, each Party shall have the right

and obligation to own, take in kind and separately dispose of its Participating

Interest share of total production available to the Parties pursuant to the

Contract from any Exploitation Area in such quantities and in accordance with

such procedures as may be set forth in the offtake agreement referred to in

Article 9.2 or in the special arrangements for natural gas referred to in

Article 9.3. If Government Oil Company is party to the offtake agreement, then

the Parties shall endeavour to obtain its agreement to the principles set forth

in this Article.

9.2



Offtake



Agreement



for



Crude



Oil



If crude oil is to be produced from an Exploitation Area, the Parties shall in

good faith, and not less than three (3) months prior to first delivery of crude



oil, negotiate and conclude the terms of an agreement to cover the offtake of

crude oil produced under the Contract. The Government Oil Company may, if

necessary ana practicable, also be party to the offtake agreement. This offtake

agreement shall, to the extent consistent with the Contract, make provision for:

(A) The delivery point, at which title and risk of loss of Participating

Interest shares of crude oil shall pass to the Parties interested (or as

the Parties may otherwise agree);

(B) Operator's regular periodic advice to the Parties of estimates of total

available production for succeeding periods, Participating Interest shares

and grades of crude oil, for as far ahead as is necessary for Operator and

the Parties to plan offtake arrangements. Such advice shall also cover for

each grade of crude oil total available production and deliveries for the

preceding period, inventory and overlifts and underlifts;

(C)

Nomination by the Parties to Operator of acceptance of their

Participating

Interest share of total available production for the

succeeding period. Such nominations shall in any one period be for each

Party's entire Participating Interest share arising during that period

subject to operational tolerances and agreed minimum economic cargo sizes

or as the Parties may otherwise agree;

(D) Elimination of overlifts and underlifts;

(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;

(F) Distribution to the Parties of Entitlements to ensure, to the extent

Parties take delivery of their Entitlements in proportion to the accrual of

such Entitlements, that each Party shall receive currently Entitlements of

grades, gravities and qualities of Hydrocarbons similar to Hydrocarbons

received by each other Party;

(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 option and the right of the other Parties to sell an Entitlement

which a Party fails to nominate for acceptance pursuant to (C) above or of

which a Party fails to take delivery, in accordance with applicable agreed

procedures, provided that such failure either constitutes a breach of

Operator's or Parties' obligations under the terms of the Contract, 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

Joint Operations. Operator shall give all Parties as much notice as is

practicable of such situation and that a sale option has arisen. Any sale

shall be of the unnominated or undelivered Entitlement as the case may be

and for reasonable periods of time as are consistent with the minimum needs

of the industry and in no event to exceed twelve (12) months. The right of

sale shall be revocable at will subject to any prior

contractual

commitments. Sales to non-affiliated third parties shall be for the

realized price f.o.b. the delivery point. Sales to any of the Parties or

their Affiliates shall be at current market value f.o.b. the delivery

point. The Party arranging the sale shall pay to the Party whose

Entitlement is involved the above price after deduction of all costs,

including storage costs, incurred in respect of such sale and a marketing

fee of an agreed percentage of the applicable price less deductions,

reflecting actual costs of disposal at immediate notice. Current market

value shall be the value of the Entitlement in international markets

(unless the Entitlement was required to be delivered into the Government's

domestic market, in which case it shall be the value therein) between a



willing buyer and a willing seller and shall be agreed between the two

Parties concerned, or failing agreement, determined by an expert to be

appointed in accordance with procedures set forth in the offtake agreement.

9.3



Separate



Agreement



for



Natural



Gas



The Parties recognize that if natural gas is discovered it may be necessary for

the Parties to enter into special arrangements for the disposal of the natural

gas, which are consistent with the Development Plan and subject to the terms of

the Contract.

ARTICLE X

ABANDONMENT OF WELLS

10.1



Abandonment



of



Wells



Drilled



as



(A) Any well which has been drilled

proposed to be plugged and abandoned

without the consent of all Parties.



Joint



Operations



as a Joint Operation and which is

shall not be plugged and abandoned



(B) Should any such Party fail to reply within the period prescribed in

Article 5.12(A)(1) or Article 5.12(A)(2), whichever is applicable, after

delivery of notice of the Operator's proposal to plug and abandon such

well, such Party shall be deemed to have consented to the proposed

abandonment. If all the Parties consent to abandonment, such well shall be

plugged and abandoned in accordance with applicable regulations and at the

cost, risk and expense of the Parties who participated in the cost of

drilling such well.



(C) If all Parties do not agree to the abandonment of such well, those

wishing to continue operations shall assume financial responsibility over

the well and shall be deemed to be Consenting Parties conducting an

Exclusive Operation pursuant to Article VII. In the case of a producing

well, the Consenting Parties shall be entitled to continue producing only

from the Zone open to production at the time they assumed responsibility

for the well.

(D) Consenting Parties taking over a well as provided above shall tender to

each of the

Non-Consenting

Parties

such

Non-Consenting

Parties'

Participating Interest share of the value of the well's salvable material

and equipment, determined in accordance with the Accounting Procedure, less

the estimated cost of salvaging and the estimated cost of plugging and

abandoning as of the date the Consenting Party assumed responsibility for

the well; provided, however, that in the event the estimated plugging and

abandoning and the estimated cost of salvaging are higher than the value of

the well's salvable material and equipment, each of the abandoning Parties

shall continue to be liable pursuant to Article 7.3(B) for their respective

Participating Interest shares of the estimated excess cost.

(E) Each Non-Consenting Party shall be deemed to have relinquished to the

Consenting Parties in proportion to their Participating Interests all of

its interest in the wellbore of a produced well and related equipment in

accordance with Article 7.4(B), insofar and only insofar as such interest

covers the right to obtain production from that wellbore in the Zone then

open to production.

(F) Subject to Article 7.9(G), Operator shall continue to operate a

produced well for the account of the Consenting Parties at the rates and

charges contemplated by this Agreement, plus any additional cost and

charges which may arise as the result of the separate allocation of

interest in such well.

10.2



Abandonment



of



Exclusive



Operations



This



Article



shall



apply



mutatis mutandis to the abandonment of an Exclusive

---------------Well or any well in which an Exclusive Operation has been conducted; provided

that no well shall be permanently plugged and abandoned unless and until all

Parties having the right to conduct further operations in such well have been

notified of the proposed abandonment and afforded the opportunity to elect to

take over the well in accordance with the provisions of this Article X.

ARTICLE XI

SURRENDER, EXTENSIONS AND RENEWALS

11.1



Surrender





(A) If the Contract requires the Parties to surrender any portion of the

Contract Area, Operator shall advise the Operating Committee of such

requirement at least one 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 V, the size and shape of the

surrendered area, consistent with the requirements of the Contract. 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, the Operator shall choose among the proposals receiving the largest

aggregate Participating Interest vote. The Parties shall execute any and

all documents and take such other actions as may be necessary to effect the

surrender. Each Party renounces all claims and causes of action against

Operator and any other Parties on account of any area surrendered in

accordance

with the

foregoing but against its

recommendation

if

Hydrocarbons are subsequently discovered under the surrendered area.

(B) A surrender

required by the

Parties.

11.2



Extension



of



of all or any part of the Contract Area which

Contract shall require the unanimous consent

the



is not

of the



Term



(A) A proposal by any Party to extend the term of the Exploration or

Exploitation Period or any phase of the Contract, a proposal to enter into

a new phase of the Exploration Period, and a proposal to extend the term of

the Contract shall be brought before the Operating Committee pursuant to

Article V.

(B) Any Party shall have the right to extend the term of the Exploration or

Exploitation Period or any phase of the Contract to enter into a new phase

of the Exploration Period or extend the term of the Contract. Any Party not

wishing to extend, shall have a right to withdraw, subject to the

requirements of Article XIII.

ARTICLE XII

TRANSFER OF INTEREST OR RIGHTS

12.1



Obligation

(A) Subject always to the requirements of the Contract, the transfer of all

or part of a Party's Participating Interest shall be effective only if it

satisfies the terms and conditions of this Article.

(B) Except in the case of a Party transferring all of its Participating

Interest, no transfer shall be made by any Party which results in the



transferor or the transferee holding a Participating Interest of less than

______________

percent (5%) or holding any interest

other than a

Participating Interest in the Contract, the Contract Area and this

Agreement.



(C) The transferring Party shall, notwithstanding the transfer, be liable

to the other Parties for any obligations, financial or otherwise, which

have vested, matured or accrued under the provision of the Contract 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 Party notifying the other Parties of its proposed

transfer.

(D) The transferee shall have no rights in and under the Contract, the

Contract Area or this Agreement unless and until it obtains the necessary

Government's approval and expressly undertakes in writing to perform the

obligations of the transferor under the Contract and this Agreement in

respect of the

Participating

Interest being

transferred,

to the

satisfaction of the Parties and furnishes any guarantees required by the

Government or the Contract.

(E) The transferee shall have no rights in and under the Contract, the

Contract Area or this Agreement unless each Party has consented in writing

to such transfer, which consent shall be denied only if such transferee

fails to establish to the reasonable satisfaction of each Party its

financial or technical capability to perform its obligations under the

Contract and this Agreement.

(F) Nothing

contained in this Article shall prevent a Party from

mortgaging, pledging, charging or otherwise encumbering all or part of its

interest in the Contract Area and in and under this Agreement for the

purpose of security relating to finance provided that:

(1) such Party shall

such interest;



remain



liable for all



obligations



relating to



(2) the encumbrance shall be subject to any necessary approval of the

Government and be expressly subordinated to the rights of the other

Parties under this Agreement; and

(3) such Party shall ensure that any such mortgage, pledge, charge or

encumbrance shall be expressed to be without prejudice to the

provisions of this Agreement.

Check



one



[X]



Optional



OPTIONAL



Alternative



ALTERNATIVE



NO.



if

1



desired.

-



Preferential



Rights



(G) Any transfer of all or a portion of Participating Interest whether

directly or indirectly by assignment, merger, consolidation, or sale of

stock, or other conveyance, other than with or to an Affiliate, shall be

subject to the following procedure:



(1) Once the transferor Party and a proposed transferee (a third party

or a Party) have fully negotiated the final terms and conditions of a

transfer, such final terms and conditions shall be disclosed in detail

to all Parties in a written notification from the transferor. Each

Party 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 thirty (30) Days of transferor's

written notification, such Party delivers to all other Parties a



counter-notification that it accepts the agreed upon terms and

conditions of the transfer without reservations or conditions. If no

Party delivers such counter-notification, the transfer to the proposed

transferee may be made, subject to the other provisions of this

Article 12, under terms and conditions no more favorable to the

transferee than those set forth in the notice to the Parties, provided

that the transfer shall be concluded within one hundred eighty (180)

Days from the date of the notice plus such reasonable additional

period as may be required to secure governmental approvals.

(2) If more than one Party counter-notifies that it intends to acquire

the Participating Interest which is the subject of the proposed

transfer, then each such Party 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 Parties, unless they otherwise agree; and

(3) In the event that a Party's proposed transfer of part or all of

its Participating 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 Parties. Such other

Parties 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.

[ ]



OPTIONAL



ALTERNATIVE



NO.



2



-



Right



of



First



Negotiation



(G) Any transfer of all or a portion of a Party's Participating interest

whether directly or indirectly by assignment, merger, consolidation, sale

of stock, or other conveyance, other than with or to an Affiliate shall be

subject to the following procedure:



(1) In the event that a Party wishes to transfer any part or all of

its Participating Interest, it shall send all other Parties written

notification of its intention and invite them to submit offers

therefor. The other Parties shall have thirty (30) Days from the date

of such notification to deliver a counter-notification with a binding

offer in accordance with Article 12.1(G)(3). If the prospective

transferor Party accepts the offer, the prospective transferor and the

offering Party shall have the next sixty (60) Days in which to

negotiate in good faith and execute the terms and conditions of a

mutually acceptable transfer agreement. If the prospective transferor

does not find any Party's offer acceptable, or if sixty (60) Days

elapse and it is evident to the prospective transferor that a fully

negotiated agreement with an offering Party is not imminent, the

prospective transferor shall be entitled for a period of one hundred

eighty (180) Days, plus such reasonable additional period as may be

necessary

to secure

governmental

approvals,

to transfer its

Participating Interest to a third party subject to the obligations set

forth in this Article, so long as terms and conditions of the transfer

to a third party are more favorable to the prospective transferor than

the best terms and conditions offered by any Party;

(2) If more than one Party counter-notifies the prospective transferor

that it intends to acquire the Participating Interest which is the

subject of the proposed transfer, then each such Party 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 Parties, unless they otherwise

agree;



(3) All Parties giving such counter-notice shall meet to formulate a

joint offer. Each such Party shall make known to the other Parties the

highest price or value in which it is willing to offer to the

prospective transferor. The proposal with the highest price or value

shall be offered to the prospective transferor as the joint proposal

of the Parties still willing to participate in such offer under the

provisions of (1) and (2) above;

(4) In the event that a Party's proposed transfer of part or all of

its Participating 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 prospective transferor in any notification to the other

Parties. Such other Parties 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.

12.2



Rights

(A) Each Party shall have the right, subject to the

12.1, to freely transfer its Participating Interest.



Check



if



OPTIONAL

[X]



provisions of Article



desired.

PROVISION



(B) If the transfer of all or a portion of a Party's Participating Interest

whether directly or indirectly by, assignment, merger, consolidation, sale

of stock, or other conveyance is part of a wider transaction (package deal)

involving such assets, such transfer shall be subject to Article 12.1(G),

only if such prospective transferor's Participating Interest represents

_____________ percent (35%) or more of the value of such wider transaction.

ARTICLE XIII

WITHDRAWAL FROM AGREEMENT





13.1



Right



of



Withdrawal



(A) Subject to the provisions of this Article, any Party may withdraw from

this Agreement and the Contract by giving notice to all other Parties

stating its decision to withdraw and specifying a proposed effective date

of withdrawal which shall be at least sixty (60) Days, but not more than

one hundred eighty (180) Days after the date of such notice. Such notice

shall be unconditional and irrevocable when given.

(B) Notwithstanding Article 13.1(A) a Party shall not have the right to

withdraw from this Agreement and the Contract until the Minimum Work

Obligation set forth in the Contract has been fulfilled. However, if the

Operating Committee or any Party decides to accept new Minimum Work

Obligations by voluntarily extending the current or entering into a new

exploration period under the Contract, a Party that voted against such

decision shall not be prevented from withdrawing; provided that such Party

delivers notice of its withdrawal to all Parties within thirty (30) Days of

such vote pursuant to Article 11.2 and fully satisfies its outstanding

Minimum Work Obligation, if any.

(C) Subject to Articles 13.1(A) and (B) and Article 13.5, the effective

date of withdrawal for a withdrawing Party shall be the later of:

(1) The date proposed in the notice of withdrawal; or

(2) The date that the withdrawing



Party has fulfilled its obligations



under this Article.

13.2



Partial



or



Complete



Withdrawal



(A) Within

thirty (30) Days of receipt each

withdrawing

Party's

notification, each of the other Parties may also give notice that it

desires to withdraw from this Agreement and the Contract. Should all

Parties give notice of withdrawal, the Parties shall proceed to abandon the

Contract Area and terminate the Contract and this Agreement. If less than

all of the Parties give such notice of withdrawal, then the withdrawing

Parties shall take all steps to withdraw from the Contract and this

Agreement on the earliest possible date and execute and deliver all

necessary instruments, and documents to assign their Participating Interest

to the Parties which are not withdrawing, without any compensation

whatsoever, in accordance with the provisions of Article 13.6.

(B) If any part of the withdrawing Party's Participating Interest remains

unclaimed after sixty (60) Days from the date of the first notice of

withdrawal, the Parties shall be deemed to have decided to withdraw from

the Contract and this Agreement, unless at least one Party agrees to accept

the unclaimed Participating Interest.

(C) Any Party

(1)



Check

[ ]



one



withdrawing



under Article 11.2 or under this Article shall:



Alternative.



ALTERNATIVE



NO.



1



Withdraw from the entirety of the Contract Area, including all Exploitation

Areas and all Discoveries made prior to such withdrawal, and thus abandon to the

other Parties not joining in its withdrawal all its rights to Cost Oil and

Profit Oil generated by Operations after such withdrawal and all rights in such

associated Joint Property.

[ ]



ALTERNATIVE



NO.



2



Withdraw from all exploration activities under the Contract, but not from any

Exploitation Area, Commercial Discovery, or Discovery whether appraised or not,

made prior to such withdrawal. Such withdrawing Party shall retain its rights

in the Joint Property but only insofar as they relate to any Exploitation Area,

Commercial Discovery or Discovery whether appraised or not, and shall abandon

all other rights in the Joint Property.

13.3



Voting



After giving its notification of withdrawal, a Party shall not be entitled to

vote on any matters coming before the Operating Committee, other than matters

for which such Party has financial responsibility.

13.4



Obligations



and



Liabilities



(A) A withdrawing Party, prior to its withdrawal, shall satisfy all

obligations and liabilities it has incurred or attributable to it prior to

its withdrawal, including, without limitation, any expenditures budgeted

and/or

approved by the Operating

Committee

prior to its written

notification of withdrawal (development projects included),

and any

liability for acts, occurrences or circumstances taking place or existing

prior to its withdrawal. Furthermore, any liens, charges and other

encumbrances

which the

withdrawing

Party

placed on such Party's

Participating Interest prior to its withdrawal shall be fully satisfied or

released, at the withdrawing Party's expense, prior to its withdrawal. A

Party's

withdrawal

shall not

relieve it from

liability

to the

non-withdrawing Parties with respect to any obligations or liabilities



attributable to the withdrawing

Party

identifiable at the time of withdrawal.



which



are



not



identified



or





(B) Notwithstanding the foregoing, a Party shall not be liable for any

operations or expenditures it voted against if it sends notification of its

withdrawal within five (5) Days (or within twenty-four (24) hours if the

drilling rig to be used in such operation is standing by on the Contract

Area) of the Operating

Committee vote approving such operation or

expenditure, nor shall such Party be liable for any operations or

expenditures approved by the Operating Committee, excluding those approved

pursuant to Article 13.5, after notice has been given pursuant to Article

13.1.

13.5



Emergency



A Party's notification of withdrawal shall not become effective if prior to the

proposed date of withdrawal a well goes out of control or a fire, blowout,

sabotage or other emergency occurs. The notification of withdrawal shall become

effective only after the emergency has been contained and the withdrawing Party

has paid, or has provided, security satisfactory to the Parties for its

Participating Interest share of the costs of such emergency.

13.6



Assignment



A withdrawing Party shall assign its Participating Interest to each of the

non-withdrawing Parties which shall be allocated to them in the proportion which

each of their Participating Interests (prior to the withdrawal) bears to the

total Participating Interests of all the non-withdrawing Parties (prior to the

withdrawal), unless the non-withdrawing Parties agree otherwise. The expenses

associated with the withdrawal and assignments shall be borne by the withdrawing

Party.

13.7



Approvals



A withdrawing Party 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, and any penalties or expenses incurred by the

Parties in connection with such withdrawal shall be borne by the withdrawing

Party.

Check

13.8

[X]



one



Alternative.



Abandonment

ALTERNATIVE



Security

NO.



1



-



Short



Form



Abandonment



Security



(A) A withdrawing Party shall provide Security satisfactory to the other

Parties to satisfy any such obligations or liabilities which were approved

or accrued prior to notice of withdrawal, but which become due after its

withdrawal, including, without limitation, Security to cover the costs of

an abandonment, if applicable.

[ ]



ALTERNATIVE



NO.



2



-



Long



Form



Abandonment



Security



If under the terms of the Contract or applicable law, the Parties are or become

obliged to pay or contribute to the cost of abandonment, then the following

provisions shall apply:



(A) During preparation of a Development Plan, the Parties shall negotiate

and agree a security agreement, which shall be completed and executed by

all Parties participating in such Development Plan prior to application for



an Exploitation

Area.

following principles:



The



security



agreement



shall



incorporate



the



(1) Security shall be provided by each such Party for each Calendar

Year commencing with the Calendar Year in which the Discounted Net

Value equals one hundred twenty-five percent (125%) of the Discounted

Net Cost.

(2) The amount of Security required to be provided by each such Party

in any Calendar Year (including security previously provided which

will still be current throughout such Calendar Year) shall be equal to

the amount by which one hundred twenty-five percent (125%) of the

Discounted Net Cost exceeds the Discounted Net Value.

"Discounted Net Cost" means that portion of each Party's anticipated before tax

cost of abandoning a development in accordance with applicable law which remains

after deduction of salvage value. Such portion should be calculated at the

anticipated time of abandonment and discounted at the Discount Rate to December

31, of the Calendar Year in question.

ADiscounted Net Value" means the value of each Party's estimated Entitlement

which remains after payment of estimated liabilities and expenses required to

win, save and transport such production to the delivery point and after

deduction of estimated applicable taxes, royalties, imposts and levies on such

production. Such Entitlement shall be calculated using estimated market prices

and including taxes on income, discounted at the Discount Rate to December 31,

of the Calendar Year in question. No account shall be taken of tax allowances

expected to be available in respect of the costs of abandonment.

"Discount Rate" means the rate per annum equal to the one (1) month term, LIBOR

rate for U.S. Dollar deposits as published by The Wall Street Journal or if not

----------------------published then by the Financial Times of Londoneffective as of thirty (30)

--------------------------Business Days prior to the start of a Calendar Year.

(B) Failure

Agreement.



to



provide



Security



shall



constitute



default



under this



(C) "Security" means a standby letter of credit issued by a bank or an on

demand bond issued by a corporation, such bank or corporation having a

credit rating indicating it has sufficient worth to pay its obligations in

all reasonably foreseeable circumstances, or, failing the provision of

either of those, cash contributed to a secure fund administered by

independent trustees and invested in ____________________________.

13.9



Withdrawal



or



Abandonment



by



all



Parties





In the event all Parties decide to withdraw or are required to do so pursuant to

this Article, the Parties 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 Parties with the Government, to satisfy any requirements of

applicable law or to facilitate the sale, disposition or abandonment of property

or interests held by the Joint Account.

ARTICLE XIV

RELATIONSHIP OF PARTIES AND TAX

14.1



Relationship



of



Parties



The rights, duties, obligations and liabilities of the Parties under this

Agreement shall be individual, not joint or collective. It is not the intention

of the Parties to create, nor shall this Agreement be deemed or construed to



create mining or other partnership, joint venture, association or trust, or as

authorizing any Party to act as an agent, servant or employee for any other

Party for any purpose whatsoever except as explicitly set forth in this

Agreement. In their relations with each other under this Agreement, the Parties

shall not be considered fiduciaries except as expressly provided in this

Agreement.

14.2



Tax



Each Party shall be responsible for reporting and discharging its own tax

measured by the income of the Party and the satisfaction of such Party's share

of all contract obligations under the Contract and under this Agreement. Each

Party shall protect, defend and indemnify each other Party from any and all

loss, cost or liability arising from a failure or refusal to report and

discharge such taxes or satisfy such obligations.

Check

[ ]

14.3



if



desired.



OPTIONAL

United



PROVISION

States



Tax



Election





(A) If, for United States federal income tax purposes, this Agreement and

the operations under this Agreement are regarded as a partnership (and if

the Parties have not agreed to form a tax partnership) each "U.S. Party"

(as defined below) elects to be excluded from the application of all of the

provisions of Subchapter "K", Chapter 1, Subtitle "A" of the United States

Internal Revenue Code of 1986 (the "Code") as permitted and authorized by

Section 761 of the Code and the regulations promulgated under the Code.

________________, to the extent required by Section 6231(a)(7) of the Code,

is designated as the tax matters party, and is authorized and directed to

execute for each U.S. Party such evidence of this election as may be

required by the Internal Revenue Service, including specifically, but not

by way of limitation, all of the returns, statements, and the data required

by United States Treasury Regulations Section 1.761 and 1.6031-1) d) (2).

Should there be any requirement that any U.S. Party give further evidence

of this election, each U.S. Party shall execute such documents and furnish

such other evidence as may be required by the Internal Revenue Service or

as may be necessary to evidence this election.

(B) No such U.S. Party shall give any notice or take any other action

inconsistent with the election made above. If any future income tax laws of

the United States contain provisions similar to those in Subchapter "K",

Chapter 1, Subtitle "A" of the United States Internal Revenue Code of 1986,

under which an election similar to that provided by Section 761 of the Code

is permitted, each U.S. Party shall make such election as may be permitted

or required by such laws. In making the foregoing election, each U.S. Party

states that the income derived by it from operations under this Agreement

can be adequately determined without the computation of partnership taxable

income.

(C) For the purposes of this Article, "U.S. Party" shall mean any Party

which is subject to the income tax law of the United States of America in

respect of operations under this Agreement.

(D) No activity shall be conducted under this Agreement that would cause

any non U.S. Party to be deemed to be engaged in a trade or business within

the United States of America under applicable tax laws and regulations.

(E) A Party which is not a U.S. Party shall not be required to do any act

or execute any instrument which might subject them to the taxation

jurisdiction of the United States of America.



ARTICLE XV

CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY

15.1



Confidential



Information



(A) Subject to the provisions of the Contract, the Parties agree that all

information and data acquired or obtained by any Party in respect of Joint

Operations shall be considered confidential and shall be kept confidential

and not be disclosed during the term of the Contract and for a period of

_______________ (2) years after expiration of the Contract to any person or

entity not a Party to this Agreement, except:

(1) To an Affiliate, provided such Affiliate maintains confidentiality

as provided in this Article;

(2) To a governmental

Contract;



agency or other



entity



when



required by the





(3) To the extent such data and information is required to be

furnished in compliance with any applicable laws or regulations, or

pursuant to any legal proceedings or because of any order of any court

binding upon a Party;

(4) Subject to Article 15.1(B), to potential contractors, contractors,

consultants and attorneys employed by any Party where disclosure of

such data or

information

is essential to such

contractor's,

consultant's or attorney's work;

(5) Subject to Article 15.1(B), to a bona fide prospective transferee

of a Party's Participating Interest (including an entity with whom a

Party is conducting bona fide negotiations directed toward a merger,

consolidation or the sale of a majority of its or an Affiliate's

shares);

(6) Subject to Article 15.1(B), to a bank or other financial

institution to the extent appropriate to a Party arranging for funding

for its obligations under this Agreement;

(7) To the extent such data and information must be disclosed pursuant

to any rules or requirements of any government or stock exchange

having jurisdiction over such Party, or its Affiliates; provided that

if any Party desires to disclose information in an annual or periodic

report to its or its Affiliates' 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 Party shall comply with

Article 20.2;

(8) To its respective employees for the purposes of Joint Operations,

subject to each Party taking customary precautions to ensure such data

and information is kept confidential;

(9) Where any data or information which,

becomes a part of the public domain.



through no fault of a Party,



(B) Disclosure as pursuant to Article 15.1(A)(4), (5), and (6) shall not be

made unless prior to such disclosure the disclosing Party has obtained a

written undertaking from the recipient party to keep the data and

information strictly confidential and not to use or disclose the data and

information except for the express purpose for which disclosure is to be

made.

15.2



Continuing



Obligations



Any Party ceasing to own a Participating Interest during the term of this

Agreement shall nonetheless remain bound by the obligations of confidentiality

and any disputes shall be resolved in accordance with Article XVIII.

15.3



Proprietary



Technology





Nothing in this Agreement shall require a Party to divulge proprietary

technology to the other Parties; provided that where the cost of development of

proprietary technology has been charged to the Joint Account, such proprietary

technology shall be disclosed to all Parties bearing a portion of such cost and

may be used by such Party, or its Affiliates, in other operations.

15.4



Trades



Notwithstanding the foregoing provisions of this Article, Operator may, with

approval of the Operating Committee, make well trades and data trades for the

benefit of the Parties, with any data, the cost of which has been charged to the

Joint Account, so obtained to be furnished to all Parties. In such event,

Operator must enter into an undertaking with any third party to such trade to

keep such information confidential.

ARTICLE XVI

FORCE MAJEURE

16.1



Obligations



If as a result of Force Majeure any Party 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 to furnish security, then the obligations of the Party

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, but for no longer period. The Party claiming Force Majeure

shall notify the other Parties of the Force Majeure situation within a

reasonable time after the occurrence of the facts relied on and shall keep all

Parties informed of all significant developments. Such notice shall give

reasonably full particulars of said Force Majeure, and also estimate the period

of time which said Party will probably require to remedy the Force Majeure. The

affected Party 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 labor dispute except on terms acceptable to it

and all such disputes shall be handled within the sole discretion of the

affected Party.

16.2

Check

[X]



Definition

one



of



Force



Majeure



Alternative.



ALTERNATIVE



NO.



1



For the purposes of this Agreement, "Force Majeure" shall mean circumstances

which were irresistible or beyond the reasonable control of the Party concerned.

[ ]



ALTERNATIVE



NO.



2



For the purposes of this Agreement, "Force Majeure" shall have the same meaning

as is set out in the Contract.



ARTICLE XVII

NOTICES

Except as otherwise

between the Parties



specifically provided, all notices authorized or required

by any of the provisions of this Agreement, shall be in



writing, in English and delivered in person or by registered mail or by courier

service or by any electronic means of transmitting written communications which

provides confirmation of complete transmission, and addressed to such Parties as

designated below. The originating notice given under any provision of this

Agreement shall be deemed delivered only when received by the Party to whom such

notice is directed, and the time for such Party to deliver any notice in

response to such originating notice shall run from the date the originating

notice is received. The second or any responsive notice shall be deemed

delivered when received. "Received" for purposes of this Article with respect

to written notice delivered pursuant to this Agreement shall be actual delivery

of the notice to the address of the Party to be notified specified in accordance

with this Article. Each Party shall have the right to change its address at any

time and/or designate that copies of all such notices be directed to another

person at another address, by giving written notice thereof to all other

Parties.





Attention:

Telecopy:

Telex:

Answerback



Code:



Attention:

Telecopy:

Telex:

Answerback



Code:







Attention:

Telecopy:

Telex:

Answerback



Code:



Attention:

Telecopy:

Telex:

Answerback



Code:





ARTICLE XVIII

APPLICABLE LAW AND DISPUTE RESOLUTION

18.1



Applicable



Law





This Agreement shall be governed by, construed, interpreted and applied in

accordance with the laws of England, excluding any choice of law rules which

would refer the matter to the laws of another jurisdiction.

18.2

Check

[ ]



Dispute

one



Resolution



Alternative.



ALTERNATIVE



NO.



1



-



Courts



Each Party submit to the exclusive jurisdiction of the courts of England

(or if jurisdiction is not granted by such court by another court having

jurisdiction) for the purpose of finally resolving any dispute, controversy

or claim arising out of or in relation to or in connection with this

Agreement or the operations carried out under this Agreement, including

without limitation any dispute as to the validity,

interpretation,

enforceability or breach of this Agreement.

Each Party irrevocably

designates, appoints and empowers the agent specified below to receive on

its behalf service of any and all process in any legal action or proceeding

which may be instituted in the courts of ___________, _____________ in

connection with any such dispute, controversy or claim:



A Party's submission to the jurisdiction of the courts of ___________,

_____________ in accordance with the foregoing shall not limit the right of

such Party to institute any legal action or proceeding for the enforcement

of any order or judgment of such courts in any other court having

jurisdiction.

[X]



ALTERNATIVE



NO.



2



-



Arbitration



(A) Any dispute, controversy or claim arising out of or in relation to or

in connection with this Agreement or the operations carried out under this

Agreement, including without limitation any dispute as to the validity,

interpretation, enforceability or breach of this Agreement, shall be

exclusively and finally settled by arbitration, and any Party may submit

such a dispute, controversy or claim to arbitration.

Check

[ ]



one



Alternative.



ALTERNATIVE



NO.



1





(B) A single arbitrator shall be appointed by unanimous consent of the

Parties. If the Parties, however, cannot reach agreement on an arbitrator

within ________ (___) Days of the submission of a notice of arbitration,

the appointing authority for the implementation of such procedure shall be

the ______________, who shall appoint an independent arbitrator who does

not have any financial interest in the dispute, controversy or claim. If

___________ refuses or fails to act as the appointing authority within

ninety (90) Days after being requested to do so, then the appointing

authority shall be

____________,

who shall appoint an independent

arbitrator who does not have any financial interest in the dispute,

controversy or claim.

[ ]



ALTERNATIVE



NO.



(B) The arbitration



2

shall be head and determined by three (3) arbitrators.



Each side shall appoint an arbitrator of its choice within ____ (___) Days

of the submission of a notice of arbitration.

The Party-appointed

arbitrators shall in turn appoint a presiding arbitrator of the tribunal

within _______ (___) Days following the appointment of both Party-appointed

arbitrators. If the Party-appointed arbitrators cannot reach agreement on a

presiding arbitrator of the tribunal and/or one Party refuses to appoint

its Party-appointed arbitrator within said _______ (___) Day period, the

appointing authority for the implementation of such procedure shall be the

INT. ARBIT. BOARD, Paris who shall appoint an independent arbitrator who

does not have any financial interest in the dispute, controversy or claim.

If ___________ refuses or fails to act as the appointing authority within

ninety (90) Days after being requested to do so, then the appointing

authority shall be _______________, who shall appoint an independent

arbitrator who does not have any financial interest in the dispute,

controversy or claim. All decisions and awards by the arbitration tribunal

shall be made by majority vote.

(C) Unless otherwise expressly

arbitration proceedings:



agreed in



writing by the



Parties to the



(1) The arbitration proceedings shall be held in London, England;

(2) The arbitration proceedings

language and the arbitrator(s)

language;

(3) The arbitrator(s) shall

independent and impartial;



be



shall be conducted in the English

shall be fluent in the English

and



remain



at all



times



wholly



(4) The arbitration proceedings shall be conducted in accordance with

the Arbitration Rules of Paris,

Check

[ ]



one



Alternative.



ALTERNATIVE





in effect

[X]

as



on



the



ALTERNATIVE

amended



from



NO.



1



Effective

NO.

time



Date.



2

to



time.



(5) Any procedural issues not determined under the arbitral rules

selected pursuant to Article 18.2(C)(4) shall be determined by the law

of the place of arbitration, other than those laws which would refer

the matter to another jurisdiction;

(6) The costs of the arbitration proceedings (including attorneys'

fees and costs) shall be borne in the manner determined by the

arbitrator(s);

(7) The decision of the sole arbitrator or a majority of the

arbitrators, as the case may be, shall be reduced to writing; final

and binding without the right of appeal; the sole and exclusive remedy

regarding any claims, counterclaims, issues or accountings presented

to the arbitrator; made and promptly paid in U.S. Dollars free of any

deduction or offset; and any costs or fees incident to enforcing the

award, shall to the maximum extent permitted by law, be charged

against the Party resisting such enforcement;

(8) Consequential, punitive or other similar damages shall not be

allowed; provided, however, the award may include appropriate punitive

damages where a Party has engaged in delaying and dilatory actions;



(9) The award shall include interest from the date of any breach or

violation of this Agreement, as determined by the arbitral award, and

from the date of the award until paid in full, at the Agreed Interest

Rate;

(10) Judgment upon the award may be entered in any court having

jurisdiction over the person or the assets of the Party owing the

judgment or application may be made to such court for a judicial

acceptance of the award and an order of enforcement, as the case may

be; and

(11) Whenever the Parties are of more than one nationality, the single

arbitrator or the presiding arbitrator, as the case may be, shall not

be of the same nationality as any of the Parties or their ultimate

parent entities.

ARTICLE XIX

ALLOCATION OF COST RECOVERY RIGHTS

19.1



Allocation



of



Total



Production





For the purposes of recovery of Petroleum Costs, the total quantity of

Hydrocarbons which are produced and saved from all Exploitation Areas in a

Calendar Quarter and to which the Parties are entitled under the Contract shall

be designated as either Cost Oil or Profit Oil. Such Cost Oil and Profit Oil

shall be allocated among the Exploitation Areas in proportion to each

Exploitation Area's total quantity of Hydrocarbons produced and saved in such

Calendar Quarter with adjustments in quantities to reflect the differences in

value if different qualities of Hydrocarbons are produced, segregated and sold

separately.

19.2



Allocation



of



Cost



Oil



Cost Oil allocated to each Exploitation Area pursuant to Article 19.1 shall be

allocated to the Parties in proportion to their respective Participating

Interests in each such Exploitation Area to the extent required to recover in

the sequence incurred all Petroleum Costs which are specifically attributable to

each such Exploitation Area and which are recoverable in such Calendar Quarter.

19.3



Allocation



of



Profit



Oil



Profit Oil allocated to each Exploitation Area pursuant to Article 19.1, if any,

shall be allocated among the Parties in proportion to their respective

Participating Interests in each such Exploitation Area.

19.4



Allocation



of



Excess



Cost



Oil



Subject to the Contract, to the extent that the value, determined in accordance

with Article 9.2(H), of the Cost Oil allocated to each Exploitation Area

pursuant to Article 19.1 exceeds the Petroleum Costs which were specifically

attributable to each such Exploitation Area and which were recovered pursuant to

Article 19.2, the excess ("Excess Cost Oil") shall be allocated as follows:

(A) First, a percentage (equal to the percentage of Profit Oil, if any, to

which the Parties would have been entitled during such Calendar Quarter if

the Contract applied separately to each such Exploitation Area) of the

Excess Cost Oil shall be allocated among the Parties in proportion to their

respective Participating Interests in each such Exploitation Area;

(B) Second, the Excess Cost Oil that is not allocated pursuant to Article

19.4(A) shall be allocated among the Parties in proportion to their

respective Participating Interests as set out in Article 3.1(A) in order to



recover in the sequence incurred any Petroleum Costs which were incurred in

the conduct of Joint Operations and which are recoverable in such Calendar

Quarter; and



(C) Third, the Excess Cost Oil that is not allocated pursuant to Article

19.4(A) or Article 19.4(B) shall be allocated among the Parties in

proportion to their respective Participating Interests in each Exclusive

Operation in order to recover in the sequence incurred any Petroleum Costs

which were incurred in the conduct of Exclusive Operations and which are

recoverable in such Calendar Quarter.

ARTICLE XX

GENERAL PROVISIONS

20.1



Conflicts



of



Interest



(A) Each Party undertakes that it shall avoid any conflict of interest

between its own interests (including the interests of Affiliates) and the

interests of the other Parties in dealing with suppliers, customers and all

other organizations or individuals doing or seeking to do business with the

Parties in connection with activities contemplated under this Agreement.

(B) The provisions of the preceding paragraph shall not apply to:

(1) A Party's performance which is in accordance with

preference laws or policies of the host government; or



the



local



(2) A Party's acquisition of products or services from an Affiliate,

or the sale thereof to an Affiliate, made in accordance with rules and

procedures established by the Operating Committee.

20.2



Public



Announcements



(A) Operator shall be responsible for the preparation and release of all

public announcements and statements regarding this Agreement or the Joint

Operations; provided that, no public announcement or statement shall be

issued or made unless prior to its release all the Parties have been

furnished with a copy of such statement or announcement and the approval of

at least two (2) non-affiliated Parties holding fifty percent (50%), or

more, of the Participating Interests has been obtained. Where a public

announcement or statement becomes necessary or desirable because of danger

to or loss of life, damage to property or pollution as a result of

activities arising under this Agreement, Operator is authorized to issue

and make such announcement or statement without prior approval of the

Parties, but shall promptly furnish all the Parties with a copy of such

announcement or statement.



(B) If a Party wishes to issue or make any public announcement or statement

regarding this Agreement or the Joint Operations, it shall not do so unless

prior to its release, such Party furnishes all the Parties with a copy of

such announcement or statement, and obtains the approval of at least two

(2) non-affiliated Parties holding fifty percent (50%) or more of the

Participating Interests; provided that, notwithstanding any failure to

obtain such approval, no Party shall be prohibited from issuing or making

any such public announcement or statement if it is necessary to do so in

order to comply with the applicable laws, rules or regulations of any

government, legal proceedings or stock exchange having jurisdiction over

such Party as set forth in Articles 15.1(A)(3) and (7).

20.3



Successors



and



Assigns



Subject to the limitations on transfer contained in Article XII, this Agreement

shall inure to the benefit of and be binding upon the successors and assigns of

the Parties.

20.4



Waiver



No waiver by any Party of any one or more defaults by another Party in the

performance of this Agreement shall operate or be construed as a waiver of any

future default or defaults by the same Party, whether of a like or of a

different character. Except as expressly provided in this Agreement no Party

shall be deemed to have waived, released or modified any of its rights under

this Agreement unless such Party has expressly stated, in writing, that it does

waive, release or modify such right.

20.5



Severance



of



Invalid



Provisions



If and for so long as any provision of this Agreement shall be deemed to be

judged invalid for any reason whatsoever, such invalidity shall not affect the

validity or operation of any other provision of this Agreement except only so

far as shall be necessary to give effect to the construction of such invalidity,

and any such invalid provision shall be deemed severed from this Agreement

without affecting the validity of the balance of this Agreement.

20.6



Modifications



Except as is provided in Article 20.5, there shall be no modification of this

Agreement except by written consent of all Parties.

20.7



Headings



The topical headings used in this Agreement are for convenience only and shall

not be construed as having any substantive significance or as indicating that

all of the provisions of this Agreement relating to any topic are to be bound in

any particular Article.

20.8



Singular



Reference

20.9



to



Plural



the



singular



any



gender



includes a reference to the plural and vice versa.



Gender



Reference

20.10

1.1





and



to



Counterpart



includes



a



reference



to



all



other



genders.



Execution



This Agreement may be executed in any number of counterparts and each such

counterpart shall be deemed an original Agreement for all purposes; provided no

Party shall be bound to this Agreement unless and until all Parties have

executed a counterpart. For purposes of assembling all counterparts into one

document, Operator is authorized to detach the signature page from one or more

counterparts and, after signature thereof by the respective Party, attach each

signed signature page to a counterpart.

20.11



Entirety



This Agreement is the entire agreement of the Parties and supersedes all prior

understandings and negotiations of the Parties. WITH THE EXCEPTION OF AGREEMENT

# MARCH 8, 1992 AND AMENDED ON FEBRUARY 25/93.

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

IN WITNESS



of



their



agreement



each



Party



has



caused



its duly authorized



representative to sign this

representative's signature.



instrument



on



YINKA FOLAWIYO PETROLEUM COMPANY LIMITED

- -------------------------------------------(Company Name)

By:



Title:

Date:



/S/ Tunde Folawiyo

-------------------T.B. Folawiyo

-------------(Print or Type name)

Executive Director

------------------March 13, 1992

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



LIBERTY TECHNICAL SERVICES LIMITED

- ------------------------------------(Company Name)

By:



Title:

Date:



/s/ Wade Cherwayko

-------------------W.G. Cherwayko

--------------(Print or Type name)

President

--------March 13, 1992

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



(Company



Name)



By:

(Print or Type name)

Title:

Date:



(Company



Name)



By:

(Print or Type name)

Title:

Date:









EX-10.17

22



EXHIBIT



10.17



the



date



indicated



below such



PROJECT MANAGER AGREEMENT

THIS AGREEMENT is made and entered into effective the 8th day of March, 1992 by

and between:

YINKA FOLAWIYO PETROLEUM CO. LTD.

(hereinafter referred to as "Owner/Operator")

AND

LIBERTY TECHNICAL SERVICES LTD.

(hereinafter referred to as "Technical Partner")

and

ABACAN INTERNATIONAL RESOURCE MANAGEMENT INC.

(hereinafter referred to as "Abacan")

WHEREAS Technical Partner and Yinka Folawiyo Petroleum Company Limited ("Owner")

are parties to that certain Joint Venture Agreement dated March 8, 1992 ("Joint

Venture Agreement") and the Joint Operating Agreement and Accounting Procedure

attached thereto as Schedule "B" ("JOA") relating to the exploration,

development and production sharing of Oil Prospecting Licence No. 309 in the

Benin Basin, Nigeria ("Concession");

WHEREAS



Owner



is



designated



as



Operator



under



the



JOA;



WHEREAS Owner and Technical Partner entered into an agreement dated March 8,

1992 wherein Technical Partner agreed to provide Owner certain administrative

and technical assistance in carrying out its duties and responsibilities as

Operator under the JOA ("Technical Assistance Agreement");

WHEREAS Technical Partner wishes to contract the services of Abacan who has the

necessary qualified administrative, technical, and professional personnel to

carry out the duties of Project Manager pursuant to the JOA and the Technical

Assistance Agreement;

NOW THEREFORE, in consideration of the premises and mutual covenants contained

herein, the Parties hereby agree as follows:

1.



Abacan is designated

Project Manager as outlined in the Technical

Assistance Agreement for the Concession and Abacan agrees to perform the

responsibilities and duties set out in the JOA in accordance with the terms

of this Agreement, the Technical Assistance Agreement and the JOA.





2.

As Project Manager, Abacan will have the general responsibility of carrying

out the duties and responsibilities as Operator of the Concession under the

terms of the JOA and without restricting the generality of the foregoing,

Project Manager will:

(i)



establish an Operating Committee

Technical Partner and Abacan;



comprised of representatives



(ii) prepare Work Programs, Budgets and Authorizations

approval by the Operating Committee;

(iii)prepare and issue

Committee;



Cash Calls for



operations



for



approved



from Owner,



Expenditures

by the



for



Operating



(iv) carry out operations on the Concession in accordance with the Work Programs

and Authorizations for Expenditures approved the Operating Committee;



(v)



prepare and issue statements,

billing

operations carried out on the Concession.



and



adjustments



relating



to



3.



Abacan will be compensated for its duties hereunder in accordance with the

provisions of the Accounting Procedure attached as an Exhibit to the JOA

and the management agreement attached hereto.



4.



The terms of this Agreement will be in effect for a period of five (5)

years from the date hereof and may be renewed for a further period of five

(5) years with the approval of the parties hereto. These periods are

however subject to earlier termination if in the opinion of the Joint

Operating Committee the Owner/Operator is deemed technically capable of

performing its function as Operator.



IN WITNESS WHEREOF the Parties have caused this Agreement to be executed in

duplicate by their authorized representatives effective as of the day and year

first above written.

LIBERTY

Per:



TECHNICAL



SERVICES



LTD.



/s/ Wade Cherwayko

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



ABACAN



INTERNATIONAL



RESOURCE



MANAGEMENT



INC.





Per: /s/ Wade Cherwayko

---------------------YINKA

Per:



FOLAWIYO



PETROLEUM



COMPANY



LTD.



/s/ Tunde Folawiyo

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









EX-10.18

23



EXHIBIT



10.18

TECHNICAL ASSISTANCE AGREEMENT



THIS AGREEMENT is made and entered into effective the 8th day of March,

1992, by and between YINKA FOLAWIYO PETROLEUM COMPANY LIMITED (hereinafter

referred to as OPERATOR), and LIBERTY TECHNICAL SERVICES LTD., (hereafter

referred to as "TECHNICAL Adviser"), both companies (hereinafter collectively

referred to as "the Parties") being incorporated and existing under the lows of

the Federal Republic of Nigeria, (hereinafter referred to as "NIGERIA").

WHEREAS YINKA FOLAWIYO PRTROLEUM COMPANY LIMITED and LIBERTY TECHNICAL

SERVICES LTD. are Parties to that certain Joint Operating Agreement of even date

herewith, covering petroleum operations on block 309, Nigeria (hereinafter

referred to as "JOA"). wherein YINKA FOLAWIYO PETROLEUM COMPANY LIMITED is



designated as the Operator and LIBERTY TECHNICAL SERVICES LTD. is designated as

the Technical Adviser, and

WHEREAS, YINKA FOLAWIYO

administrative and technical

responsibilities as Operator



PETROLEUM COMPANY LIMITED requires certain

assistance in carrying out its duties and

under the JOA; and



WHEREAS, LIBERTY TECHNICAL and its affiliated companies have the necessary

qualified, administrative technical and professional personnel to assist YINKA

FOLAWIYO PETROLEUM COMPANY LIMITED in carrying out its duties and

responsibilities as Operator.

Now,

contained

1.

same



therefore, in consideration

herein, the Parties hereby



of the premises and mutual covenants

agree as follows:



DEFINITIONS



Except as otherwise defined herein, the teams used herein shall have the

meaning as set forth in the JOA.

11.



TECHNICAL Adviser AND ASSISTANCE



2.1



Designation:

In accordance with JOA, the Parties designate LIBERTY

TECHNICAL SERVICES Technical Adviser for OPL 309 and LIBERTY TECHNICAL

SERVICES agrees to accept and perform the responsibilities and duties

associated therewith.



2.2



Duties and

Responsibilities:

The Technical Adviser has to general

responsibility of assisting YINKA FOLAWIYO PETROLEUM COMPANY LIMITED in

carrying out is responsibilities as Operator for OPL 309 and, in so doing,

to further assist in establishing itself as a fully competent petroleum

company holding international recognition to fulfill its responsibilities,

the Technical Adviser shall:





a)



In accordance with the JOA establish a Technical Transfer

conduction with YINKA FOLAWIYO PETROLEUM COMPANY LIMITED.



Plan in



b)



carry out the duties and responsibilities assigned to the

Adviser in the JOA subject to the laws of Nigeria, and



c)



in accordance with the JOA hereof, provide YINKA FOLAWIYO PETROLEUM

COMPANY LIMITED with assistance and guidance in the development and

execution of training plans and programs in order to develop competent

Nigerian personnel, and



2.3



Working



Technical



Relationship:



a)



In the conduct of the Joint Operations contemplated in the JOA, the

technical Adviser and YINKA FOLAWIYO PETROLEUM COMPANY LIMITED shall

fully consult with each other on a regular basis, in a harmonious

manner and as frequently as may be required, for the purpose of

reviewing and scheduling the activities being carried out under this

Agreement.



b)



Nothing contained herein shall be construed as representing any

assignment by YINKA FOLAWIYO

PETROLEUM COMPANY LIMITED of its

responsibility as Operator of OPL 309. LIBERTY TECHNICAL SERVICES LTD.

shall always fulfill its responsibilities and perform the duties

described herein under the general direction of the Operator.



2.4



Training:

1.



In providing the training assistance, the Technical Adviser shall, in

accordance with training plans and programs approved by the Operating



committee, do all that can be reasonable required to result in each

Nigerian employee of the Operator, reaching the highest possible level

of qualification. Without limiting the generality of the foregoing, it

is contemplated that the Technical Adviser shall:





111.



a)



assist YINKA

FOLAWIYO

PETROLEUM

COMPANY

LIMITED in the

development of training programs, both for separate individuals

and groups of trainees.



2b.



such Technical Assistance and Training Committee shall operate in

Advisery capacity only and any decision or advice taken or given

respectively shall be subject to the approval of the Operating

Committee.

ESTABLISHMENT



OF



PRESENCE



IN



NIGERIA



3.1



Offices and

Employment:

YINKA FOLAWIYO

PETROLEUM

COMPANY LIMITED

acknowledges and recognizes that the services to be provided by the

Technical Adviser will require the Technical Adviser to establish separate

offices of its own in Nigeria, the number of employees required to perform

such services will be at the sole discretion of the Technical Adviser;

however, the Technical Adviser warrants that it will employ no more that

the number of employees with may reasonable be required to carry out such

services.



3.2



Personnel: Any of LIBERTY TECHNICAL SERVICES LTD. or its affiliates=

personnel performing services under this Agreement shall remain at all

times the employees of LIBERTY TECHNICAL SERVICES LTD. or its affiliates

and shall not, for any purposes, be regarded as employees of YINKA FOLAWIYO

PETROLEUM COMPANY LIMITED.

LIBERTY TECHNICAL

SERVICES LTD. or its

affiliates shall remain solely responsible for the payment of their

salaries and benefits. LIBERTY TECHNICAL SERVICES LTD. may, at any time,

transfer and replace any such personnel.



3.3



Visas and Work Permits: In those cases where the Technical Adviser

determines it is necessary to fill a vacant position in its organization

with an expatriate employee, YINKA FOLAWIYO PETROLEUM COMPANY LIMITED

pledges, if necessary, to use its good offices to assist in obtaining any

visas, work permits or other like permits which may be required by the

Government.

V



5.1



-



CONFIDENTIALITY



confidential data and Information: Each Party undertakes that, without the

prior written consent of all the other Parties, it will treat as

confidential and prevent disclosure to any third parties of all data and

information relating to the License area or operations undertaken pursuant

to this agreement. This obligation shall continue throughout the term of

this Agreement or for five (5) years following termination of the License,

whichever is the later. Consent is hereby given for each Party such

information and data to its Affiliate and to persons and contractors

engaged by the Operator and/or the Technical Adviser to the extent required

for efficiently carrying out Joint Operations, to counsellors of any party

including legal counsel, lending organizations and external professional

consultants used by any Party to secure financing auditors, and prospective

third party assignees provided that such Affiliates and such other parties

accept a strict obligation to maintain the confidential nature of the date

of information disclosed and not to divulge such data or information to

other parties without prior written consent. With respect to all parties

other than affiliates, acceptance of the confidentiality obligation set

forth in the the previous sentence shall be in writing. The provisions of

this Article shall not apply to data or information which, through no fault

of the disclosing Party, has become a part of the public domain. The

provisions of this Article have no application to any disclosure required



by the applicable laws and regulations. however, prior to any such

disclosure, the disclosing Party shall inform the other Parties with as

mush notice as possible so that they may have the opportunity to contest

the government=s right to require such disclosure.



5.2 Trading Rights: The Operator and/or the Technical Adviser nay, only with

the prior written approval of the Operating Committee and on such terms and

conditions as it may determine, exchange any such data and information for

other similar data and information and the Operator and/or the Technical

Adviser shall promptly provide the Parties with a conformed copy of the

agreement relating to such exchange and all such data and information.

VI

6.1



-



ASSIGNMENTS



Limitations on Assignments: PARTIES may assign this Agreement to any of

their parents affiliates or subsidiaries, and may subcontract any other

services to be provided hereunder to a parent, affiliate, subsidary o third

party. Provided that the consent of the other party is sought and obtained

prior to any such assignment.

ASSIGNMENT



6.1a)LIBERTY TECHNICAL SERVICES LTD hereby assigns its obligations and duties

rights as outlined in this agreement and the Joint Venture Agreement along

with its attached

operating

and

accounting

procedures to ABACAN

International Resource Management Inc., and its affiliated companies in

Nigeria.

VII

7.1



TERM



Term: Unless otherwise mutually agreed by the Parties hereto, this

Agreement shall continue enforce until such time as Liberty Technical

Services limited divests itself o fall its rights, title and interest in

OPL 309 or the Oil mining Lease covering OPL:309 upon its termination or

for a period of ten years, whichever occurs first.

VIII



8.1



-



-



ARBITRATION



Any dispute arising out or in connection with this Agreement, including any

question regarding its existence, validity or termination, shall be

referred to and finally resolved by arbitration under the Rules of the

London court or international Arbitration, with Rules are deemed to be

Incorporated by reference into this clause;

The governing law of the Agreement shall be the substantive law of NIGERIA.



be



The tribunal shall consist of a three/member tribunal and two of them shall

nominated by the parties on the two respective sides.





The place of arbitration

arbitration shall be English.



shall be London, England.



the language of the



IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed

in duplicate by their authorized representatives effective as to the day and

year first above written.

By: /s/ T.B. Folawiyo

______________________________

T.B. Folawiyo

Executive Director

YINKA FOLAWIYO PETROLEUM



COMPANY



LIMITED



By: /s/ Wade G. Cherwayko

_______________________________

Wade G. Cherwayko

President

LIBERTY TECHNICAL SERVICES



LTD











EX-10.19

24





Exhibit



10.19

JOINT VENTURE AGREEMENT

BETWEEN

OPTIMUM PETROLEUM DEVELOPMENT LIMITED

AND

AGBARA RESOURCES LIMITED



NIGERIAN OIL PROSPECTING LICENCE 310



Ince & Co.

Knollys House

11 Byward Street

London EC3R 5EN

Tel: 0171 623 2011

Fax: 0171 623 3225

Ref: OW/JL/KAG/79/60/440





THIS JOINT VENTURE AGREEMENT is executed at Lagos, Nigeria on November 27, 1996

and made effective as of November 27, 1996 by and between:

OPTIMUM PETROLEUM DEVELOPMENT LIMITED, of 18E, Gerrard Road, Ikoyi, Nigeria

(hereinafter referred to as the "Owner/Operator")

and

AGBARA RESOURCES LIMITED, of 7th Floor, Folawiyo

Plaza, 38 Warehouse Road, Apapa, Lagos, Nigeria,

(hereinafter referred to as "Technical Partner")

WHEREAS:

(a)



The Minister approved the allocation of Oil Prospecting Licence No. 310

("OPL 310") to the Owner/Operator by a letter of allocation dated February

3, 1992 and referenced as PI.BAL/3750/V.3/49.



(b)



In accordance with the letter of allocation referred to above, the Minister

issued OPL 310 to the Owner/Operator on July 27, 1993.



(c)



OPL 310 has a term of five years commencing February 3, 1992 and grants to

the Owner/Operator the right inter alia, to prospect for Petroleum in and

under the area identified as being subject to the terms of the OPL 310.



(d)



The letter of allocation and applicable Government legislation and policy

stipulates that the Owner/Operator is entitled to transfer a Participating

Interest in OPL 310 and the Owner/Operator has agreed to transfer such a

Participating Interest to the Technical Partner with full title guarantee,

free from liens, charges, equities and/or other encumbrances.



(e)



It is an express term of this Agreement that in view of the remaining term

of the current OPL 310, the Owner/Operator is required to obtain an

extension or renewal OPL for Concession Block 310.



(f)



The Owner/Operator and the Technical Partner have agreed to establish a

joint venture for the purposes of joint

exploration,

development,

production, sale, disposal and export of Petroleum won and saved pursuant

to OPL 310 and any extension, or renewals thereof, from that area

hereinafter defined as Concession Block 310, subject to and in accordance

with the terms hereof.



NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter

set forth, the Parties hereby agree as follows:



ARTICLEI - DEFINITIONS AND INTERPRETATION

----------------------------------------1.1

In this

following words

opposite them:



Agreement, and the recitals and schedules attached hereto, the

and expressions shall have the meanings respectively set



"ACCOUNTING PROCEDURE" means the accounting procedure attached to and forming

part of the Joint Operating Agreement in effect from time to time.

"AFFILIATE" means a company, partnership or other legal entity which controls,

or is controlled by, or which is controlled by an entity which controls a Party,



and for the purpose hereof, "CONTROL" means the ownership directly or indirectly

of more than seventy-five (75%) percent of the shares or voting rights or

privileges in a company, partnership or legal entity.

"AGREEMENT" "hereof", "herein", "hereto" and similar expressions means this

Joint Venture Agreement together with the schedules attached hereto and any

amendment or amendments made between the Parties in writing from time to time.

"COMMERCIAL QUANTITIES" means Petroleum in such quantities which, in the opinion

of the Technical Partner merits, and/or under the terms of prevailing Government

legislation or policy permits the Parties to make a joint application to the

Minister for an Oil Mining Lease, said OML to be issued if possible in the joint

names of both Parties as set forth in Article V herein.

"CONCESSION BLOCK 310" means the surface area to which the rights for Petroleum

prospecting, exploration, development, production, sale, disposal and export

conferred by OPL 310 are applicable, and which area is identified in red upon a

survey plan attached to the formal Oil Prospecting Licence document issued by

the Ministry, or elsewhere within the records of the Ministry and which term

shall throughout this Agreement include any and all extensions or renewals to

the term of OPL 310 that may be granted by the Ministry, any extension or

renewal oil prospecting licence effecting the same or a similar geographic area

issued by the Ministry or any oil mining leases arising therefrom.

"COST OIL" means forty (40%) percent of the total production of Petroleum from

Concession Block 310 which is allocated to the Technical Partner for the

recovery of Petroleum Costs.

"EFFECTIVE



DATE"



means



the



27



day



of



November,



1996;



"GOVERNMENT" means the national government of the Federal Republic of Nigeria as

represented by the Minister and/or the Ministry of Petroleum Resources.

"JOINT ACCOUNT" means that account or accounts established and maintained by the

Technical Partner in accordance with the provisions of this Agreement and the

Joint Operating Agreement, the costs of which are chargeable to the Parties in

accordance with their Participating Interest of Petroleum Costs.

"JOINT OPERATING AGREEMENT" OR "JOA" means the Development Phase Joint Operating

Agreement, the Exploration and Production Phase Joint Operating Agreement,

and/or the Decommissioning Phase Joint Operating Agreement, as the case may be

to be entered into between the Parties during the term of OPL 310 and/or OML

310 as appropriate, in compliance with the provisions of Article X hereof, and

which agreement shall govern all present and future Joint Operations performed

on Concession Block 310.

-2

"JOINT OPERATIONS" means such field development and decommissioning activities

involving without limitation, acquisition, seismic operations, exploration,

development, exploitation, production, sale, disposal and export of Petroleum

won and saved from Concession Block 310, all decommissioning activities

performed thereon, together with any other activity which is desirable in the

reasonable opinion of the Technical Partner, and/or necessary to comply with

good oil field practice. All Petroleum Costs incurred in respect of Joint

Operations shall be for the Joint Account of the Parties hereto pro rata with

their respective Participating Interest of Petroleum Costs.

"JOINT PROPERTY" means, at any particular time, all wells, reservoirs (whether

discovered or not), facilities, equipment, materials, information, funds and

other property held for the Joint Account and owned by the Parties pro rata

their respective Participating Interest of Production.

"MINIMUM



WORK



OBLIGATIONS"



means



those



work



and/or expenditure obligations



which must be performed or completed as part of the Work Program in order to

satisfy the minimum work and expenditure obligations specified and established

by the Ministry in OPL 310 or any extensions or renewals thereof, and which

obligations are set out in Schedule "B" hereto.

"MINISTER" means the Honourable Minister of the Ministry of Petroleum Resources

of the Government.

"MINISTRY" means the Ministry of Petroleum Resources of the Government.

"OIL MINING LEASE 310" OR "OML 310" means the oil mining lease issued or

issuable in the joint names of the Owner/Operator and the Technical Partner by

the Ministry following the submission of a joint application to the Ministry as

set out in Article V herein. The application for OML 310 shall occur following

the Technical Partner's determination that Commercial Quantities exist and/or

have been satisfied and/or satisfaction of the Minimum Work Obligations, and

which OML allows for continued long term exploration, development, production,

sale, disposal and export of Petroleum won and saved from Concession Block 310

in direct continuation of those rights previously granted to the Owner/Operator

under OPL 310 or any extensions or renewals thereof, all in accordance with

applicable Government legislation and administrative policy.

"OIL PROSPECTING LICENCE NO. 310" OR "OPL 310" means Oil Prospecting Licence No.

310 issued by the Minister to the Owner/Operator in accordance with the

provisions of applicable Government legislation on February 3, 1992, having a

term of 5 years from the date thereof and when used herein shall include (a) all

rights, title and interest granted by the Ministry therein, (b) any extension or

renewal of the existing oil prospecting licence and any new or replacement oil

prospecting licence issued by the Ministry to the Owner/Operator following the

expiry of the term of the current oil prospecting licence effecting the same or

substantially the same geographic area or any part thereof, and (c) all

schedules and plans attached thereto or referred to therein pursuant to which

the Owner/Operator (and the Technical Partner by virtue of this Agreement) have

acquired an interest in all Petroleum found and produced within the geographic

area defined and described in the oil prospecting licence and any extensions or

renewals thereof including specifically the right to prospect for, save and

remove, export and dispose by way of sale, any such Petroleum discovered.

"OWNER/OPERATOR"



means Optimum Petroleum Development Limited of Lagos, Nigeria.



"OPERATING COMMITTEE" means the that committee designated as the Operating

Committee in accordance with the provisions of the JOA and which is established

in accordance with the terms of Article X.

"PARTICIPATING INTEREST" means the undivided interest of each Party, expressed

as a percentage, in the rights, benefits and obligations established by this

Agreement, as set forth and described in Article VI and Article VII hereof.

-3

"PARTICIPATING INTEREST OF PETROLEUM COSTS" means the undivided interest of each

Party, expressed as a percentage, in the right, benefits and obligations

established by this Agreement, as more particularly set forth and described in

Article VI hereof.

"PARTICIPATING INTEREST OF PRODUCTION" means the undivided interest of each

Party, expressed as a percentage, in the rights and benefits and obligations

established by this Agreement, as more particularly set forth and described in

Article VII hereof.

"PARTY"

assigns

"PARTIES"



means any one party to this Agreement and any permitted successors or

in accordance with the provisions of this Agreement.

mean



collectively



the



Owner/Operator



and



Technical



Partner.



"PAYOUT" means that point in time when gross revenues from the sale of Cost Oil

is equal to the Petroleum Costs in respect of Concession Block 310.

"PETROLEUM" means all mineral oil (or any related hydrocarbons), natural gas as

it exists in its natural strata (including condensate, sulphur and any and all

other liquid and gaseous hydrocarbons) and does not include coal or bituminous

states or other stratified deposits from which oil can be extracted by

destructive distillation.

"PETROLEUM COSTS" means all obligations, liabilities, costs, claims and expenses

of whatever nature incurred by the Technical Partner, both within and outside of

Nigeria, whether incurred before, during or after the commencement of the

Minimum Work Obligations and/or commencement of Joint Operations on Concession

Block 310 or any extension thereof, and any and all operations thereon, or in

respect thereof. All such costs incurred shall be allocated to the Joint

Account whether those costs were incurred before or after the Effective Date

hereof. For the avoidance of doubt, any and all costs associated with

decommissioning of field operations of whatever nature on Concession Block 310

are included within this definition of Petroleum Costs.

"PROFIT OIL" means that percentage of the total production of Petroleum from

Concession Block 310, in excess of Cost Oil and Tax Oil (being 30% before

payout), which is allocated to the Parties in accordance with the provisions of

Article VII hereof.

"TAX OIL" means thirty percent (30%) of the total production of Petroleum from

Concession Block 310 which is allocated to the Government as full payment of any

and all royalties, taxes and petroleum profits taxes or other similar

assessments and includes any oil which the Government elects, in its sole

discretion, to take in kind.

"TECHNICAL ASSISTANCE AGREEMENT" means the Technical Assistance Agreement

between the Technical Partner and Owner/Operator setting forth the terms of the

technical and operational support to be provided by the Technical Partner to the

Owner/Operator, and which agreement is appended hereto as Schedule "C".

"TECHNICAL

Nigeria.



PARTNER"



means



Agbara



Resources



Limited with an office in Lagos,



"WORK PROGRAM" means the general work program and Joint Operations to be

conducted on Concession Block 310, to be prepared by the Technical Partner and

approved by the Ministry.

1.2



Appended



hereto



are



the



following



schedules:



-4

Schedule "A"



-



Schedule "B"

Schedule "C"



-



All schedules

Agreement.



OPL 310 and related correspondence and documentation from

the Ministry issued as of the Effective Date hereof

Minimum Work Obligations

Technical Assistance Agreement

referred



to



above



are incorporated into and form part of this



1.3

Wherever any provision of any schedule to this Agreement conflicts with

any provision in the body of this Agreement, the provisions of the body of this

Agreement shall prevail. Reference herein to a schedule shall mean a reference

to a schedule to this Agreement. References in any schedule to the Joint

Venture Agreement shall mean a reference to this Agreement.

1.4



Time



1.5



The



shall

division



be



of

of



the

this



essence



hereof.



Agreement into headings, sections, subsections,



clauses, subclauses, and paragraphs and the provision of headings herein is for

convenience of reference only and shall not affect the interpretation of this

Agreement.

1.6

In this Agreement, where the context requires, the singular shall

include the plural and the plural shall include the singular.

1.7

money



All references to currency, unless otherwise specified, are to lawful

of the United States of America.

ARTICLE II - SCOPE

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



2.1

The Parties hereby undertake and agree subject to and in accordance

with the terms of this Agreement, to associate and participate together in a

joint venture for the conduct of Joint Operations on Concession Block 310. In

particular, the Parties agree that they shall at all times, use their best

endeavours to facilitate joint exploration, field development, exploitation,

production, sale and disposal, export of Petroleum won and saved and all

decommissioning activities relating thereto, together with other activities

necessary in the reasonable opinion of the Technical Partner to facilitate

exploration and development of Concession Block 310.

2.2

During the continuance of this Agreement, both the Owner/Operator and

the Technical Partner shall, in respect of any and all Joint Operations or other

operations performed on or under Concession Block 310, use their best endeavours

to ensure that such operations are conducted at all times in compliance with

good oil field practice. Each of the Parties shall continue to act at all times

in the manner which shall (a) ensure the continued good standing of OPL 310 or

any extensions or renewals thereof and/or OML 310 as appropriate, (b) maintain

the integrity of any Petroleum reservoirs contained within Concession Block 310,

and (c) ensure compliance with the terms of all contracts entered into in

respect of Concession Block 310 which are necessary for the conduct of Joint

Operations thereon.

ARTICLE III - GOVERNMENT APPROVAL

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

The Owner/Operator will forthwith provide the Technical Partner with

satisfactory evidence that the Owner/Operator is the lawful and legal licensee

of OPL 310, that OPL 310 is valid and subsisting, that the Owner/Operator is not

in default thereof and that all terms imposed by the Minister and Ministry in

respect of OPL 310 are at any particular time including the Effective Date, in

good standing.

-5

3.2

The Owner/Operator will supply the Technical Partner with a copy of

any and all documentation confirming the Owner/Operator's legal and beneficial

ownership interest of OPL 310 and any extensions or renewals thereof. In

particular the Owner/Operator accepts that it is required to demonstrate to the

satisfaction of the Technical Partner that it has full title guarantee, free

from any liens, charges, equities or other encumbrances in respect of OPL 310

and/or OML 310 as applicable.

3.3

The Owner/Operator shall also provide the Technical Partner with any

amendments and correspondence relating to its ownership interest in OPL 310,

including any and all applications for extensions or renewals thereof together

with copies of all geological, geophysical and any other technical data which

the Owner/Operator has in its possession relating to Concession Block 310 or

immediately surrounding concession blocks.



3.4

The Owner/Operator agrees with the Technical Partner that it shall

promptly provide the Technical Partner with true copies of all correspondence

concerning OPL 310 and, when applicable, OML 310 that are issued by the

Owner/Operator and/or the Ministry.

3.5

The Owner/Operator acknowledges to the Technical Partner that it shall

continuously maintain OPL 310 and/or OML 310 as applicable, in good standing

with the Government without interruption, and shall upon request by the

Technical Partner provide the Technical Partner with satisfactory evidence of

compliance with the provisions contained herein. The Technical Partner shall be

entitled to receive notice of and attend at any and all meetings effecting OPL

310 and any renewals or extensions thereof and OML 310 as applicable, between

the Owner/Operator and the Ministry.

ARTICLE IV - EXPLORATION PROGRAM

-------------------------------4.1

The Parties shall carry out an exploration program upon Concession

Block 310 in accordance with the Work Program and which Work Program will, upon

completion be sufficient to meet the Minimum Work Obligations imposed by the

Ministry in respect of OPL 310, and any renewals or extensions thereof, and

which Minimum Work Obligations shall be sufficient to secure each of the Parties

with a Participating Interest of Production produced from Concession Block 310.

4.2

The conduct of the Work Program and all Joint Operations on Concession

Block 310 shall be in accordance with the terms of the JOA and in accordance

with prevailing good oil field practice.

ARTICLE V - APPLICATION FOR OIL MINING LEASE

-------------------------------------------5.1

In the event that Petroleum is discovered in Commercial Quantities on

Concession Block 310 and/or the Parties have complied with the Minimum Work

Obligations set forth in OPL 310 or any renewals or extensions thereof, the

Owner/Operator together with the Technical Partner shall collectively make a

joint application on behalf of both Parties to the Ministry for OML 310 at the

earliest possible date. The application shall specifically request that the OML

be jointly issued in the names of both the Owner/Operator and the Technical

Partner.

ARTICLEVI - PARTICIPATING INTEREST OF PETROLEUM COSTS

----------------------------------------------------6.1

All Petroleum Costs incurred in respect of Joint Operations whether

incurred before or after the Effective Date carried out in respect of Concession

Block 310, before Payout, shall be allocated as follows:

Owner/Operator

Technical Partner



0%

100%



6.2

All Petroleum Costs incurred in respect of Joint Operations carried out

in respect of Concession Block 310, after Payout, shall be shared and allocated

as follows:

-6

Owner/Operator

Technical Partner

6.3

other



60%

40%



All Petroleum (subject to Tax Oil), Joint Property and any and all

equipment, material or property of whatsoever nature related to the



conduct of any Joint Operations on Concession Block 310 (other than equipment or

property that is leased from third parties) and any other assets acquired by the

Parties pursuant to the terms of this Agreement from time to time shall be owned

by the Parties in accordance with their respective Participating Interest of

Petroleum Costs.

6.4

Unless otherwise provided in this Agreement, the obligations of the

Parties herein and all liabilities and expenses incurred by the Technical

Partner in connection with the Joint Operations shall be charged to the Joint

Account and all credits to the Joint Account shall be shared by the Parties, as

among themselves, all in accordance with their respective Participating Interest

of Petroleum Costs.

6.5

Each of the Parties hereby covenants to contribute and/or pay the

Petroleum Costs which shall include the Technical Partner's assessment of

decommissioning costs (such costs to be assessed in accordance with good oil

field practice), in an amount equal to its respective Participating Interest of

Petroleum Costs from time to time, and to bear all Petroleum Costs paid or

incurred pursuant to this Agreement on behalf of such Party or Parties in

portions equal to their Participating Interest of Petroleum Costs.

6.6

Any tax credits, royalty credits or reduction in Tax Oil or any other

benefits generated by or resulting from or arising in connection with Joint

Operations carried out on Concession Block 310 shall be shared and allocated

equally between the Parties.

ARTICLE VII - PARTICIPATING INTEREST OF PRODUCTION

-------------------------------------------------7.1

The Owner/Operator hereby acknowledges and confirms that the Technical

Partner is entitled to its Participating Interest of Production for Concession

Block 310 as set forth in Paragraph 7.2 below.

7.2

relate

shared



All benefits, revenues and receipts of whatsoever nature as same

to the sale of Petroleum produced from Concession Block 310 shall be

and allocated as follows:



(a)



Before



(b)



Payout:

Cost Oil

--------



Tax Oil

-------



Profit Oil

----------



Technical Partner



40%

--------



0%

-------



20%

----------



Owner/Operator



0%

--------



0%

-------



10%

----------



Government



0%

--------



30%

-------



0%

----------



Cost Oil

--------



Tax Oil

-------



Profit Oil

----------



Technical Partner



0%

--------



0%

-------



30%

----------



Owner/Operator



0%

--------



0%

-------



40%

----------



Government



0%

--------



30%

-------



0%

----------



After



Payout:



-7

7.3

In the event the Government elects to exercise its right to

participate in the development of Concession Block 310 such rights to include

the benefits and obligations associated with such participation, the

Participating Interest of Production of the Parties will be amended accordingly,

on a pro rata basis, based upon the level of Government participation provided

however that the Participating Interest of Production of the Technical Partner

shall in no event be reduced to less than 24%. The Parties agree to execute

such documents as may be necessary to reflect any such transfer of interest and

joinder of the Government as a party to the terms of this Agreement.

7.4

Subject to Article 7.3, the Owner/Operator agrees with the Technical

Partner that in the event that Tax Oil payable to the Government exceeds 30%,

that there will be no reduction to the Technical Partner's Participating

Interest of Production to less than 24%.

7.5

In the event of Government participation, the rights and obligations

of the Parties as set forth herein shall remain unchanged as they relate to one

another. However, at the request of the Technical Partner, the Parties shall

enter into separate JOA and other agreements with the Government with respect to

the rights, obligations and benefits of the Parties on the one hand and the

Government on the other. Any payments received from the Government arising out

of such participation shall be credited to the Joint Account and applied

pro-rata to the Parties Participating Interest of Production.

-8

ARTICLE VIII - DECOMMISSIONING

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

The Parties to this Agreement expressly acknowledge that they may be

liable to undertake decommissioning operations and consequently to make payments

in respect of future decommissioning expenditure either by Government law and/or

regulation or by operation of international law which the Parties agree shall be

based upon the level of the Participating Interest of Production attributable to

them during the term of this Agreement.

8.2

Accordingly, the Parties have agreed that the Technical Partner should

consult with technical taxation and such other specialists, as necessary,

operating in the area of decommissioning to obtain an estimate of the level of

decommissioning expenditures and to prepare a model for decommissioning

operations including a payments schedule.

8.3

In the event that both Parties decide to withdraw from operations or are

required to do so pursuant to this Article, the Parties 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 Parties with the Government, to satisfy

any requirements of applicable law or to facilitate the sale, disposition or

decommissioning of property (whether Joint Property or otherwise) or interests

held by the Joint Account.

8.4

Nothing herein shall eliminate the obligations of the Parties for any

and all decommissioning liabilities or costs and the Parties agree to make

payment of their full decommissioning liability upon demand by the other Party

based upon their Participating Interest of Petroleum Costs at the time

decommissioning commences.

ARTICLE IX -----------ASSIGNMENT OF PARTICIPATING

--------------------------INTEREST AND RESTRICTIONS OF SHARE TRANSFER



------------------------------------------9.1

Subject always to the requirements of this Agreement, including, the

obligation of the Owner/Operator to maintain OPL 310 and/or OML 310, as

applicable, in good standing with the Government at all times, the transfer of

all or part of a Party's Participating Interest shall be effective only if the

transferring Party satisfies the terms and conditions set forth herein.

9.2

shares



The Owner/Operator shall not permit any transfer or issuance of its

or those of its Affiliates that will result in:



(a)



those shareholders of the Owner/Operator or its Affiliates on the

Effective

Date

holding

less than 75% of the shares of the

Owner/Operator or its Affiliates following the share sale transaction;

and



(b)



any of the shares of the Owner/Operator being held by any person,

corporation or other entity that is or is regarded as being a foreign

entity under the terms of letter of allocation from the Ministry to

the Owner/Operator

dated February 3, 1992 or under any other

Government legislation or policy.



9.3

Notwithstanding Article 9.2(a) above, the Owner/Operator including its

Affiliates who have or may acquire a Participating Interest in OPL 310 and/or

OML 310 as appropriate,expressly agrees that it shall be prohibited from

undertaking any share issuance or transfer, including the pledge of its shares

as security or otherwise, where such dealings may have the effect of

constituting a breach of any of the terms of OPL 310 and/or OML 310, as

appropriate, the letter of allocation, the OPL 310 deed document, or any

applicable Government legislation or policy. Such a restriction shall also

apply to the Technical Partner subsequent to its name appearing on the OPL 310

and/or OML 310, as appropriate.

-9

9.4

The Owner/Operator shall not transfer, assign, farmout, pledge, charge

or otherwise encumber its Participating Interest in OPL 310 or OML 310, as

applicable, with any third party without the express written consent of the

Government, such consent to specifically state that following the transfer,

assignment, farmout, pledge, charge or encumbering that OPL 310 and/or OML 310,

as appropriate, continues to be in all respects valid and in good standing.

Such a restriction shall also apply to the Technical Partner subsequent to its

name appearing on the OPL 310 and/or OML 310, as appropriate.

9.5

The Owner/Operator expressly accepts that the foregoing restrictions on

its dealings with its shares and Participating Interest is essential in order to

maintain OPL 310 and/or OML 310 as appropriate, in good standing for continued

benefit of both Parties to this Agreement.

9.6

Subject always to receipt of the requisite consents and Government

approvals to any transfer of interest as set forth in this Article IX, if a

Party transfers all or part of its Participating Interest herein, the Parties

shall amend this Agreement to reflect the revised Participating Interests of the

Parties.

ARTICLE X

JOINT OPERATING AGREEMENT AND TECHNICAL ASSISTANCE AGREEMENT

-----------------------------------------------------------10.1

The Parties hereto agree that the Joint Operations on Concession Block

310 shall be conducted in accordance with the provisions of a Joint Operating

Agreement and Technical Assistance Agreement, and which JOA shall establish an

Operating Committee in accordance with the terms hereof.



10.2

The Parties hereby adopt, approve and agree to abide and be bound by

the terms of the Technical Assistance Agreement in the form attached hereto as

Schedule "C";

10.3

With reference to Article 10.1 above, the Parties agree that within

120 days of the date of execution of this Agreement, the Parties shall enter

into a Development Phase JOA to be prepared by the Technical Partner (the

Development Phase JOA) in a format to be agreed between the Parties which

format shall (without limitation) deal with the following matters:

(a)

(b)



the role of the Operator;

establishment and role of the Operating Committee in keeping with the

powers and obligations referred to throughout this Agreement;

role of the Technical Partner vis-a-vis the Operator and the Operating

Committee;

the role/function of the Technical Assistance Agreement;

issues of liability;

the Parties' relationships;

Joint Operations including;

Programs

Budgets

Authorizations For Expenditure

Audits

Contract procurement and approval

Sole Risk Operations;

Non consent;

Default;

Offtake and access to the reservoir;

Minimum shareholding restriction on the Owner/Operator consistent with

the provisions herein;

Assignment and withdrawal;

Unit operating agreements;

Decommissioning;

Framework

Joint and several liability

Policy

Establishment of a fund or other payment device

Formula

Nature of security



(c)

(d)

(e)

(f)

(g)



(h)

(i)

(j)

(k)

(l)

(m)

(n)

(o)



-10

-



Timing of security

Failure to provide

Default



security



10.4

The Parties acknowledge that for the duration of the term of the

Technical Assistance Agreement, the Operating Committee established under the

JOA shall be comprised of three representatives of the Technical Partner and two

representatives of the Owner/Operator and that thereafter, the Operating

Committee shall be comprised of three representatives of the Owner/Operator and

two representatives of the Technical Partner. The Operator (as defined in the

JOA) shall at all times be subject to the inherent supervision and direction of

the Operating Committee.

10.5

In addition, when Commercial Quantities are proven and/or the Minimum

Work Obligations are satisfied and the Parties have successfully applied for and

have been jointly issued OML 310 by the Ministry, the Parties shall review the

provisions of the existing Development Phase JOA to be entered into in

compliance with Article 10.3 above. If in the opinion of the Technical Partner

acting reasonably and in compliance with good oil field practice, a new or

revised JOA governing Joint Operations relating to the conduct of ongoing

production activities on Concession Block 310 is regarded as being necessary,



the Parties shall enter into a Production Phase JOA (the "Production Phase JOA")

to be prepared by the Technical Partner within 120 days of the date of the

Technical Partners' written request for execution of such an agreement.

However, failure to enter into such an agreement within 120 days of the date of

request by the Technical Partner shall mean that then prevailing JOA shall

continue to apply to Joint Operations upon Concession Block 310.

10.6

A further review of the terms of the then current JOA shall be

undertaken by the Parties, upon the decision by the Operator following the

advice of the Technical Partner that it is necessary to commence decommissioning

operations in respect of Concession Block 310. If a new or revised JOA

governing Joint Operations relating to decommissioning activities on Concession

Block 310 is necessary in the opinion of the Technical Partner acting reasonably

and in compliance with good oil field practice, the Technical Partner shall make

a written request that the Parties enter into a Decommissioning Phase JOA (the

"Decommissioning JOA") to be prepared by the Technical Partner within 120 days

of the date of written request by the Technical Partner.

10.7

All Joint Operations upon Concession Block 310, including formation of

an Operating Committee to govern Joint Operations upon Concession Block 310,

shall be carried out in accordance with the provisions of the then current Joint

Operating Agreement and Accounting Procedure.

-11

ARTICLE XI - DISPUTE RESOLUTION

------------------------------11.1

This Agreement shall be governed by, construed, interpreted and applied

in accordance with the laws of England and Wales.

11.2

For the benefit of each Party, each Party agrees and hereby submits

themselves to the exclusive jurisdiction of the High Court of Justice in England

for resolution of all disputes arising out of or relating to this Agreement

between them, without recourse to arbitration, and accordingly submits to the

jurisdiction of the English courts.

ARTICLE XII - ENTIRE AGREEMENT

-----------------------------12.1

This Agreement constitutes the entire agreement between the Parties in

connection with the subject matter and supersedes and cancels all previous

negotiations, commitments or writings with respect to the subject matter

referenced herein and the Parties acknowledge that neither Party has entered

into this Agreement in reliance upon any representation, warranty and/or

undertaking which is not set out or referred to in this Agreement.

ARTICLE XIII - EFFECTIVE DATE AND TERM

-------------------------------------13.1

This Agreement shall have effect from the Effective Date and shall,

subject always to the Parties' continuing obligations under Articles V, VIII and

XV herein, continue in full force and effect until:

(a)



all wells have been properly abandoned in accordance with Article 8;



(b)



all obligations, claims, arbitrations and lawsuits (if any) have been

settled or otherwise disposed of in accordance with the terms of the

applicable JOA;



(c)



the time relating to the protection of confidential information and

for proprietary technology has expired in accordance with Article 15;



and

(d)



in the opinion of the Technical Partner acting reasonably, it has been

determined

that

Commercial

Quantities have not or cannot be

established or are economically unrecoverable.

ARTICLE XIV - FINANCIAL YEAR

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



14.1

such



The financial year

other date as agreed



end of the joint venture shall be December 31 or

in writing by the Parties hereto.



14.2

The financial books and records of the joint venture shall be kept in

accordance with generally accepted accounting principles and procedures of such

jurisdiction as the Operating Committee may determine based upon the

recommendation of the Technical Partner.

14.3

Subject to the terms of the Joint Operating Agreement to be entered

into in compliance with Article X above within 120 days hereof, an annual audit

of the joint venture's balance sheet, profit and loss statement and other

related financial records shall be made by a recognized public accounting or

chartered accounting firm, which is mutually agreeable to the Parties hereto.

The Parties shall be entitled to have members of its internal audit staff

inspect the records and books of the joint venture at any time and at its own

expense. In addition, either Party may, at its sole expense, engage an

independent public accounting or chartered accounting firm to audit the

financial records of the joint venture from time to time.

-12

ARTICLEXV - FIDUCIARY RELATIONSHIP

---------------------------------15.1

The Parties covenant and agree that they are entering into a joint

venture relationship and owe each other the highest level of fiduciary

responsibility and, subject to Article 15.2 herein, will not, while Parties to

this Agreement or for a period of five years following the expiry of this

Agreement, disclose to any other person, firm, corporation or entity, any

proprietary or confidential information obtained in the course hereof, or as

result of the Joint Operations contemplated in this Agreement. Any information

not generally available to the public shall be construed as proprietary or

confidential for the purposes of this Agreement including, without limitation,

all agreements between the Parties, information relating to Joint Operations,

seismic and other data, drilling techniques and results, technology, suppliers

of equipment, and names of customers, information relating to sales, markets,

target markets, strategies, advertisements, business procedures and all

financial information.

15.2

The obligation of the Parties as set forth in Article 15.1 hereof to

maintain confidentiality shall not apply to such knowledge, information,

material or business data obtained pursuant to this Agreement or relating to any

material to the joint venture which:

(a)



was demonstratably

this Agreement;



known to a Party prior to the



Effective



(b)



is available to the public in the form of written

by a third party;



(c)



shall have become available to the Parties in good faith from a third

party who has a bona fide right to disclose same;



(d)



is required to be disclosed to any federal, provincial, state or local



publication



Date of

issued



government or governmental branch, board, agency or instrumental

mentality in order to comply with applicable laws, or is required to

be disclosed to regulatory authorities including stock exchanges

having jurisdiction in respect of securities of either parties.

(e)



is required to be disclosed by a Party pursuant to public disclosure

requirements imposed under applicable securities legislation.



(f)



is required or desired to be disclosed to a Party's financial

advisors,

banks, other financial

institutions,

contractors or

potential investors in the project.



15.3

Except as expressly provided in this Agreement, each Party shall have

the right to independently engage in and receive full benefits from other

business activities, whether or not competitively with the joint venture hereby

created, without consulting the other Party, and no Party shall have any

obligation to the other Party with respect to any opportunity to acquire any

assets at any time outside the terms of the joint venture hereby constituted.

15.4

Disclosure pursuant to Article 15.2(f) shall not be made unless prior

to such disclosure, the disclosing Party has obtained a written undertaking from

the recipient to keep the data and information strictly confidential and not to

use or to disclose the data or information except for the express purpose for

which the disclosure is to be made.

15.5

Any Party ceasing to own a Participating Interest during the term of

this Agreement shall nonetheless remain bound by the obligations of this Article

XV and any disputes shall be resolved in accordance with Article XI hereof.

15.6

Nothing in this Agreement shall require a Party to divulge proprietary

technology to the other Party; provided that where the cost of development of

proprietary technology has been charged to the Joint Account, such proprietary

technology shall be disclosed to all Parties bearing a portion of such costs and

may be used by such Party or its affiliates in other operations.

-13

15.7

Notwithstanding the foregoing provisions of this Article, the Technical

Partner with the approval of the Operating Committee, may make well trades and

data trades for the benefit of the Parties, with another company or body to

secure data, the cost of which shall be charged to the Joint Account. Data

obtained shall be furnished to all Parties. In such a situation, Technical

Partner must enter into an undertaking with any third party to such trade to

keep such information confidential.

ARTICLE XVI - AMENDMENT AND WAIVER

---------------------------------16.1

Neither this Agreement nor any of its provisions may be changed,

waived, discharged or terminated orally or by any course of conduct but only by

an instrument in writing signed on behalf of each Party.

16.2

No failure to exercise or delay in exercising any right, power or

privilege under this Agreement or the part of any of the Parties shall act as a

waiver. No singular or partial exercise of any such right, power or privilege

shall preclude any other or any further exercise or the exercise of any other

right, power or privilege. The rights and remedies provided in this Agreement

are cumulative and not exclusive of any other right or remedies otherwise by

provided by law unless expressly stated.



ARTICLE XVII - COVENANTS



-----------------------17.1



The



Owner/Operator



covenants



with



the Technical Partner as follows:



(a)



the Owner/Operator is a company duly incorporated, validly existing

and in good standing under the laws of the Federal Republic of Nigeria

and that it has all necessary corporate powers to enter into this

Agreement and to carry on business herein contemplated;



(b)



the Owner/Operator is the lawful licensee of OPL 310 and the

geographic area contained within Concession Block 310, and the

Owner/Operator has not transferred, conveyed, sold, farmed out,

granted royalties to third parties or in any way encumbered its legal

or beneficial interest as licensee of OPL 310 and confirms that it has

full title guarantee free from any liens, charges, equities and/or

encumbrances with respect to OPL 310 and/or OML 310 as appropriate;



(c)



the Owner/Operator has the right and authority to execute this

Agreement and has the lawful authority under the terms of OPL 310 and

otherwise, to transfer and assign an unencumbered Participating

Interest with full title guarantee, free from any liens, charges,

equities and/or encumbrances,

to the Technical Partner all in

accordance with the provisions set forth herein;



(d)



the form of oil prospecting licence identified as OPL 310 is, to the

best of the knowledge and belief of the Owner/Operator, the present

and subsisting oil prospecting licence for the geographic area

contained in Concession Block 310, and OPL 310 is valid and in good

standing with the Government and all other regulatory agencies and

authorities;



(e)



the Owner/Operator shall assist in the promotion and successful

conduct of the joint venture including obtaining and providing the

Technical Partner with (1) all necessary

Government and other

approvals required to perform the Joint Operations, (2) a copy of the

oil prospecting licence deed document, (3) any correspondence or other

documentation (including geological, geophysical and other technical

data) which the Owner/Operator now has in its possession relating to

Concession Block 310, and (4) any and all future correspondence

between the Owner/Operator and the Ministry in connection with OPL 310

and any extensions or renewals thereof;

-14-





(f)



(g)



the Owner/Operator shall, upon execution of this Agreement, forthwith

make application to the Ministry for such extension, renewal or

replacement of OPL 310 as is necessary to enable the performance of

the Minimum Work Program within two years of the date hereof. The

Owner/Operator acknowledges that the obtaining of an extension,

renewal or replacement of OPL 310 is a strict condition of this

Agreement in favour of the Technical Partner and that the Technical

Partner shall not be required to initiate work on OPL 310 or make any

additional payments to the Owner/Operator herein until it is satisfied

that the Owner/Operator has obtained or will obtain an extension,

renewal or replacement of OPL 310, all to the satisfaction of the

Technical Partner;

The Owner/Operator and the Technical Partner shall work together to

meet the Minimum Work

Obligations

and/or to demonstrate that

Commercial Quantities of Petroleum exist within Concession Block 310

and upon meeting either, or both of these criteria, the Owner/Operator

and the Technical Partner shall make a joint application for a OML to

be issued in the joint names of both Parties to this Agreement in

compliance with Articles 5.1 and 5.2 above, and the Owner/Operator



covenants that upon establishment of Commercial Quantities, it will

use its best endeavours to secure the issue of OML 310 in respect of

Concession Block 310 in the joint names of both Parties to this

Agreement in compliance with Articles 5.1 and 5.2;

(h)



17.2



The Owner/Operator expressly acknowledges that it is bound by the

restrictions on transfer set out in Article IX herein in order to

maintain OPL 310 and/or OML 310 as appropriate in good standing with

the Ministry.

The



Technical



Partner



covenants



as



follows:



(a)



the Technical Partner is a corporation duly incorporated, validly

existing and in good standing under the laws of the Bahamas and has

all necessary corporate powers to enter into this Agreement and to

conduct and to carry on business as herein contemplated.



(b)



it shall fulfil its financial obligations to the Owner/Operator as set

forth in Article 16 hereof.



(c)



the Technical Partner shall provide all necessary financial, technical

and operational support for the conduct of the Joint Operations as

required from time to time pursuant to the terms of this Agreement and

the Technical Assistance Agreement, and shall conduct its activities

in accordance with good oilfield practice.



17.3

For the avoidance of doubt, the entire provisions of this Article

XVII are cumulative, and the Parties must ensure that these covenants continue

to remain valid at all times during the term of this Agreement. At any time

during the continuance of this Agreement, either Party may ask the other for

evidence that it is continuing to comply with these covenants in a format

satisfactory to it.

ARTICLE XVIII - MISCELLANEOUS

----------------------------18.1

Each of the Parties shall execute and deliver such other

certificates, agreements and other documents and take such other actions as may

reasonably be required by the other Party in order to consummate or implement

the transactions contemplated by this Agreement.

18.2

The liability and obligation of the Parties hereto shall be several

and not joint or collective and each Party shall be responsible only for its

obligations as herein set forth, provided however that both Parties shall be

liable to each other for the decommissioning obligations set forth in Article

XIII herein. It is expressly declared that it is not the purpose of this

Agreement to create any partnership or syndicate and neither this Agreement nor

the operations hereunder shall be construed or considered as creating any

partnership or syndicate.

18.3

All notices, requests, demands or other communications hereunder

shall be delivered by hand or sent by mail as appropriate or by facsimile, telex

or telegram to the Parties at the address provided below:

-15

Owner/Operator:

Optimum Petroleum

18E Gerrard Road

Ikoyi, Nigeria

Fax:



Development



00-234-1-684-398



Ltd.



Attention:



The



Managing



Director



Technical Partner:

Agbara Resources Limited

7th Floor, Folawiyo Plaza

38 Warehouse Road

Apapa, Lagos, Nigeria

Fax:



00-234-1-545-0301



Attention:

President



Wade



G.



Cherwayko



Any Party may from time to time change its address for service hereunder upon

written notice to the other Party. Any notice may be served by personal

delivery or by mailing the same by registered post, in a properly addressed

envelope addressed to the Party to whom such notice is to be given at it address

for service hereunder and shall be deemed to be given and received forty-eight

(48) hours after the delivery thereof. Any notice may be served by prepaid

telegram, telex or telecopy addressed to the Party to whom such notice is to be

given and any such notice so served shall be deemed to be given and received by

the addressee eighteen (18) hours after the time of delivery.

18.4

If at anytime, one or more of the provisions of this Agreement is or

becomes invalid, illegal or unenforceable for any reason in respect of or under

any law or regulation, the validity, legality and enforceability of the

remaining provisions of this Agreement shall not, as a result be effected or

impaired in any way.

18.5

Each Party shall, when required to do so by the other Party to this

Agreement now or at any future time, do, or so far as each is able to do,

procure the doing of all such acts and/or execute or procure the execution of

all such documents in a form satisfactory to the other Party as required.

18.6

This Agreement may be executed in one or more counterparts and

evidenced by facsimile copy thereof and all such counterparts or facsimile

copies together shall constitute one and the same agreement.

18.7

Each Party shall be responsible for payment of its own legal,

accounting and other costs in respect of the negotiation, completion, execution

and implementation of this Agreement.

18.8

The Owner/Operator expressly acknowledges that the Technical Partner

shall be under no obligation to initiate Joint Operations or incur Petroleum

Costs until an extension or renewal OPL for Concession Block 310 has been

granted by the Government in a form satisfactory to the Technical Partner.

-16

SCHEDULE A

TO THE JOINT VENTURE AGREEMENT

DATED NOVEMBER 27, 1996 BETWEEN

OPTIMUM PETROLEUM DEVELOPMENT LIMITED

AND AGBARA RESOURCES LIMITED



SCHEDULE B

TO THE JOINT VENTURE AGREEMENT

DATED NOVEMBER, 1996 BETWEEN

OPTIMUM PETROLEUM DEVELOPMENT LIMITED



AND AGBARA RESOURCES LIMITED

MINIMUM WORK OBLIGATIONS

(to be completed prior to the expiry of OPL 310)



1.

Seismic

Ministry; or

2.

Venture

jointly



operations and the drilling of 3 wells, all as approved by the



The establishment of Commercial Quantities (as defined in the Joint

Agreement) that permit the Owner/Operator and the Technical Partner to

apply to the Government for the conversion of OPL 310 into OML 310.





SCHEDULE C

TO THE JOINT VENTURE AGREEMENT

DATED NOVEMBER, 1996 BETWEEN

OPTIMUM PETROLEUM DEVELOPMENT LIMITED

AND AGBARA RESOURCES LIMITED

TECHNICAL ASSISTANCE AGREEMENT

[This

March



document is

1, 1999]



filed



as



Exhibit 10.20 to the Form 10-KSB dated effective





IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by

their duly authorized officers and representatives as of the day and year first

written above.

OPTIMUM



PETROLEUM



DEVELOPMENT



Per:



/s/ Alhaji Ubrahim Bunu

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



Title:



Chairman

--------



AGBARA



RESOURCES



LIMITED



Per:



/s/ Wade Cherwayko

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



Title:



President

---------











EX-10.20

25





LIMITED



Exhibit



10.20

TECHNICAL ASSISTANCE AGREEMENT

BETWEEN

OPTIMUM PETROLEUM DEVELOPMENT LIMITED

AND

AGBARA RESOURCES LIMITED



NIGERIAN OIL PROSPECTING LICENCE 310



Ince & Co.

Knollys House

11 Byward Street

London EC3R 5EN

Tel: 0171 623 2011

Fax: 0171 623 3225

Ref: OW/JL/KAG/79/60/440



THIS TECHNICAL ASSISTANCE AGREEMENT is made effective as of the effective date

of the Joint Venture Agreement, and between:

(1)

OPTIMUM PETROLEUM DEVELOPMENT

Nigeria (hereinafter referred to as

(2)

Road,



LIMITED, of 18E, Gerrard Road Ikoyi,

the "Owner/Operator"); and



AGBARA RESOURCES LIMITED, of 7th Floor, Folawiyo Plaza, 38 Warehouse

Apapa, Lagos, Nigeria, (hereinafter referred to as "Technical Partner")



WHEREAS:

(a)

The Owner/Operator and the Technical Partner are parties to a Joint

Venture Agreement ("JVA") in respect of Concession Block 310 and associated Oil

Prospecting Licence 310 ("OPL 310") together with any renewal or extension OPL

for Concession Block 310 and/or Oil Mining Lease 310 ("OML 310") as appropriate;

(b)

In accordance with the terms of the JVA, the parties have agreed to

enter into a Development Phase Joint Operating Agreement ("JOA") within 120 days

of the date of the JVA to be prepared by the Technical Partner for the purpose



of



governing



present



and



future



Joint



Operations



on Concession Block 310;



(c)

The Owner/Operator requires certain administrative and technical

assistance in performing its duties and responsibilities as Owner/Operator

pursuant to the JOA;

(d)

The Technical Partner has qualified administrative, technical and

professional personnel necessary to assist Owner/Operator in performing its

duties and responsibilities as Owner/Operator under the JOA to be entered into

and has agreed to do so in accordance with the provisions of this Agreement, the

JVA and the JOA;

(e)

The Owner/Operator expressly acknowledges and accepts that the Technical

Partner may wish to out source and/or subcontract any or all aspects of Joint

Operations to Abacan Technical Services Limited or any other affiliated company

whilst continuing to act as Technical Partner.

NOW THEREFORE in consideration of the premises and mutual covenants contained

herein, the Parties hereby agree as follows:

-2

ARTICLE I

DEFINITIONS

1.1

same

1.2

set



Except as otherwise defined herein, the terms used herein shall have the

meaning as set forth in the JVA.

The following words and expressions shall have the meanings respectively

opposite to them:



"JOINT VENTURE AGREEMENT" OR "JVA" means the Joint Venture Agreement between the

Owner/Operator and the Technical Partner in respect of Concession Block 310.

"JOINT OPERATING AGREEMENT" OR "JOA" means the Development Phase Joint Operating

Agreement, the Exploration and Production Phase Joint Operating Agreement and/or

the Decommissioning Phase Joint Operating Agreement, as the case may be to be

entered into between the Parties during the term of OPL 310 and/or OML 310 as

appropriate including any renewal or extension thereof, in compliance with

provisions of Article X of the JVA and which agreement shall govern all present

and future Joint Operations performed on Concession Block 310.

"PARTIES"



means



the



Owner/Operator



and



the



Technical



Partner.



"TECHNICAL ASSISTANCE AGREEMENT" OR "AGREEMENT" means this Technical Assistance

Agreement which is attached as a schedule to the Joint Venture Agreement.

1.3

Wherever any provision of any schedule to this Agreement conflicts with

any provision in the body of this Agreement, the provisions of the body of this

Agreement shall prevail. Reference herein to a schedule shall mean a reference

to a schedule to this Agreement. References in any schedule to the JVA shall

mean a reference to that Agreement.

1.4



Time



shall



be



of



the



essence



hereof.



1.5

The division of this Agreement into headings, sections, subsections,

clauses, subclauses, and paragraphs and the provision of headings herein is for

convenience of reference only and shall not affect the interpretation of this

Agreement.

1.6

In this Agreement, where the context requires, the singular shall

include the plural and the plural shall include the singular.



1.7

money



All references to currency, unless otherwise specified, are to lawful

of the United States of America.

ARTICLE II

TECHNICAL PARTNER AND ASSISTANCE

-3-





2.1



Designation

-----------



In accordance with the terms contained in the JVA and the terms of the JOA to be

entered into, the Parties jointly designate the Technical Partner as a technical

advisor and project manager for purposes of procuring, contracting, conducting

and/or co-ordinating Joint Operations to be performed on Concession Block 310

either by the Technical Partner or a third party appointed by the Technical

Partner.

2.2



Duties and Responsibilities

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



In accordance with the JVA, the JOA to be entered into and this Agreement, the

Technical Partner shall provide assistance to the Owner/Operator in performing

its responsibilities as Owner/Operator for Concession Block OPL 310 and, in so

doing, shall assist the Owner/Operator to establish itself as a competent

operator of international petroleum operations. Pursuant to the terms of the

JOA and this Agreement, the Technical Partner shall (without limitation) perform

the following specific duties:

(i)



Perform Joint Operations in accordance with the provisions of OPL 310

(including any renewal or extension thereof) and/or OML 310 as

appropriate, the JVA, the JOA to be entered into, this Agreement and

the instructions of the Operating Committee;



(ii) Conduct all Joint Operations in a diligent, safe and efficient manner

in

accordance

with good and prudent oil field

practice and

conservation

principles generally followed by the international

petroleum industry under similar circumstances;

(iii)Prepare and provide the Owner/Operator and Operating Committee with

all reports, data, surveys and information required to be provided by

the Owner/Operator under the JOA;

(iv) Prepare and submit to the Operating Committee the

Programs, budgets and AFE's as provided in the JOA;

(v)



proposed



Work



Prepare and submit to the Owner/Operator and Operating Committee a

report and budget in respect of Decommissioning Operations as provided

for in Article VIII in the JVA and the JOA to be entered into.



(vi) Permit the representatives of any of the Parties to have at all

reasonable times and at their own risk and expense reasonable access

to the Joint Operations with the right to observe all such Joint

Operations and to inspect all Joint Property and to conduct financial

audits of the Joint Account and otherwise as provided in the

Accounting Procedure which forms part of the JOA;

(vii)Promptly pay and discharge all liabilities and expenses incurred in

connection with Joint Operations and use its reasonable efforts to

keep and maintain the Joint Property free from any and all liens,

charges equities and/or encumbrances arising out of Joint Operations;



-4

(viii) When required pay to the Government from the Joint Account, within

the periods and in the manner prescribed by OPL 310 and/or OML 310 as

appropriate and all applicable laws and regulations, all periodic

payments, royalties, taxes, fees and other payments pertaining to

Joint Operations, but excluding any taxes measured by the incomes of

the Parties;

(ix) Assist Owner/Operator in carrying out the obligations of operator

pursuant to OPL 310 and/or OML 310 as appropriate including, but not

limited to, preparing and furnishing such reports, records and

information as may be required pursuant to the Contract on behalf of

and in the name of the Owner/Operator;

(x)



Take all necessary and proper measures for the protection of life,

health, the environment and property in the case of an emergency;

provided, however, that Technical Partner shall immediately notify the

Owner/Operator and the Operating Committee of the details of such

emergency and measures to combat same;



(xi) Provide Owner/Operator with assistance and guidance in the development

and execution of training plans and programs in order to develop

competent Nigerian personnel; and

(xii)Take such further actions as are essential or expedient in order to

perform the above mentioned specific duties or any duties ancillary

thereto.

2.3



Duties and Responsibilities of the Owner/Operator

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



2.3.1

Pursuant to the terms of the JVA, the JOA to be entered into and this

Agreement, the Owner/Operator shall perform the following specific duties:

(i)



Acquire all permits, consents, approvals, surface or other rights that

may be required for or in connection with the conduct of Joint

Operations in a timely fashion from the Government;



(ii) Maintain OPL 310 and/or OML 310 as

effect throughout the duration of

entered into and the JVA;



appropriate in full force and

this Agreement, the JOA to be



(iii)Make application to the Ministry upon execution of the JVA for such

renewal or extension of OPL 310 as is necessary to enable the

performance of the Minimum Work Programme within two years of the date

of the JVA. The Owner/Operator acknowledges that the obtaining of an

renewal or extension of OPL 310 is a strict condition of the JVA in

favour of the Technical Partner and that the Technical Partner shall

not be required to initiate work on OPL 310, provide services in

accordance with this Agreement or make any additional payments to the

Owner/Operator in terms of the JVA until it is satisfied that the

Owner/Operator has obtained and will obtain an renewal or extension of

OPL 310, or to the satisfaction of the Technical Partner in its sole

discretion.

-5

(iv) Comply with Article IX of the JVA concerning restrictions on share

transfer in order to maintain OPL 310 and/or OML 310 as appropriate in

good standing with the Ministry at all times, throughout the duration

of this Agreement, the JOA to be entered into and the JVA.



(v)



Have in accordance with the decisions of the Operating Committee, the

right and obligation to represent the Parties, in all dealings with

the Government with respect to matters arising under OPL 310 and/or

OML 310 as appropriate and Joint Operations. The Owner/Operator shall

notify the Technical Partner as soon as possible of such meetings. The

Technical Partner shall have the right to attend such meetings but

only in the capacity of observer. Nothing contained in this Agreement

shall restrict any Party from holding discussions with the Government

with respect to any issue peculiar to its particular business

interests arising under this Agreement, but in such event such Party

shall promptly advise the other Party before such discussions,

provided that such Party shall not be required to divulge to the Party

any matters discussed to the extent the same involve proprietary

information on matters not affecting the Parties.



2.3.2

The Owner/Operator expressly acknowledges to the Technical Partner

that it shall continuously maintain OPL 310 and/or OML 310 as appropriate, in

good standing with the Government without interruption, and shall upon request

by the Technical Partner provide the Technical Partner with satisfactory

evidence of compliance with the provisions contained herein. The Technical

Partner shall be entitled to receive notice of and attend at any and all

meetings effecting OPL 310 and any renewals or extensions thereof and OML 310 as

applicable, between the Owner/Operator and the Ministry.

2.4



Working Relationship

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



In the conduct of the Joint Operations contemplated in the JOA to be

entered into, the Technical Partner and Owner/Operator shall fully

consult with each other on a regular basis, in a harmonious manner and

as frequently as may be required, for the purpose of reviewing and

scheduling the activities being carried out under this Agreement;



(ii) The Technical Partner shall fulfil its responsibilities and perform

the duties described herein under the general direction of the

Owner/Operator and the Operating Committee; and

(iii)The Technical Partner shall be at liberty to appoint a project

manager (including any subsidiary of Abacan Resource Corporation) to

assist it in the performance its responsibilities herein and pursuant

to the JOA to be entered into, provided that the Technical Partner

shall obtain the written consent of the Operator prior to making such

appointment such consent not to be unreasonably withheld to be entered

into.

2.5



Training

--------



-6

In providing training assistance, the Technical Partner shall, in accordance

with training plans and programs approved by the Operating Committee, do all

that can be reasonably required to result in each Nigerian employee of the

Owner/Operator reaching the highest possible level of qualification. Without

limiting the generality of the foregoing, it is contemplated that the Technical

Partner shall assist Owner/Operator in the development of training programs,

both for separate individuals and groups of trainees.

2.6



Indemnification of Technical Partner

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



The Owner/Operator agrees with the Technical Partner that to the extent that the

Technical Partner performs the duties of Owner/Operator as defined in the JOA,

the Technical Partner shall be fully indemnified in accordance with the



indemnities



of



Owner/Operator



contained



in



the



JOA.



ARTICLE III

ESTABLISHMENT OF PRESENCE IN NIGERIA

3.1



Offices and Employment

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



Owner/Operator acknowledges and recognizes that the services to be provided by

the Technical Partner will require the Technical Partner to establish separate

offices of its own in Nigeria. The number of employees required to perform such

services will be at the sole discretion of the Technical Partner which the

Technical Partner warrants will be no more than the number of employees which

may be reasonably required to perform its duties, and responsibilities and

services.

3.2



Personnel

---------



Any of the Technical Partner's or its affiliates' personnel performing services

under this Agreement shall remain at all times the employees of Technical

Partner or its affiliates and shall not, for any purposes, be regarded as

employees of Owner/Operator. The Technical Partner or its affiliates shall

remain solely responsible for the payment of their salaries and benefits, the

costs of which will however constitute Petroleum Costs under the JVA. The

Technical Partner may, at any time, transfer and replace any of its personnel

without the prior consent of the Owner/Operator.

ARTICLE IV

ASSIGNMENTS

4.1



Limitation of Assignments

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



The Parties may assign this Agreement to any of their parents, affiliates or

subsidiaries, and may subcontract any of the services to be provided hereunder

to a parent, affiliate, subsidiary or third party, provided however that the

consent of the other party is sought and obtained prior to any such assignment

and which consent shall not be unreasonably withheld.

-7

4.2



Assignment

----------



The Technical Partner shall be entitled without further consent to assign its

obligations and duties as outlined in this Agreement and the Joint Venture

Agreement to Abacan Technical Services Limited and/or its affiliated companies

in Nigeria.

ARTICLE V

TERM

5.1



Term

----



Unless otherwise mutually agreed by the Parties in writing, this Agreement shall

commence as at the date hereof and remain in full force and effect for a term of

ten (10) years from the commencement of production from any petroleum fields

produced on Concession Block 310.



ARTICLE VI

DISPUTE RESOLUTION

6.1



Dispute Resolution

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



This Agreement shall be governed by, construed, interpreted and applied in

accordance with the laws of England and Wales.

6.2

For the benefit of each Party, each Party agrees and hereby submits

themselves to the exclusive jurisdiction of the High Court of Justice in England

for resolution of all disputes arising out of or relating to this Agreement

between them, without recourse to arbitration, and accordingly submits to the

exclusive jurisdiction of the English courts.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed

in duplicate by their authorized representatives effective as to the day and

year first above written.

OPTIMUM



PETROLEUM



DEVELOPMENT



PER:



/S/ ALHAJI UBRAHIM BUNU

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



TITLE:



CHAIRMAN

--------



AGBARA



RESOURCES



LIMITED



PER:



/S/ WADE CHERWAYKO

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



TITLE:



PRESIDENT

---------8-











EX-10.21

26





EXHIBIT



10.21



[Intentionally











Omitted]



LIMITED





EX-10.22

27





Exhibit



10.22



OIL EXPLORATION

AND

EXPLOITATION CONTRACT

DEEP OFFSHORE BLOCK 4

BETWEEN

THE GOVERNMENT OF THE REPUBLIC

OF BENIN

AND THE

ADDAX PETROLEUM - ABACAN BENIN

CONSORTIUM







TABLE OF CONTENTS









PREAMBLE



PAGE



1



I



DEFINITIONS



2



II



OBJECT OF THE CONTRACT



9



III



TERM



10



IV



OWNERSHIP OF ASSETS, DATA AND

HYDROCARBONS



13



V



RELINQUISHMENTS



15



VI



MINIMUM WORK OBLIGATIONS



16



VII



TECHNICAL COMMITTEE



18



VIII



COMPLETION OF OPERATIONS, WORK

PROGRAM, BUDGETS, REPORTS AND CONTROL



20



DECLARATION OF COMMERCIAL DISCOVERY

AND DESIGNATION OF THE DEVELOPMENT AREA



24



SOLE RISK OPERATIONS



28



IX

X



XI



ANNUAL DEVELOPMENT AND PRODUCTION

PROGRAMS



30



XII



GOVERNMENT PARTICIPATION



31



XIII



COST RECOVERY AND PRODUCTION SHARING



33



XIV



REQUIREMENTS OF DOMESTIC



35



XV



TAX SYSTEM



CONSUMPTION



37

-i-





XVI



MEASUREMENT, DISPOSAL, EVALUATION AND SALE

OF HYDROCARBONS



39



XVII



NATURAL GAS



41



XVIII



DAMAGES, ENVIRONMENTAL PROTECTION

AND SAFETY



44



XIX



PROVISIONS REGARDING EXCHANGE



48



XX



EMPLOYMENT AND TRAINING



49



XXI



ACCOUNTING



50



XXII



CONFIDENTIAL NATURE OF THE DATA



51



XXIII



ASSIGNMENT OF RIGHTS



53



XXIV



FORCE MAJEURE



54



XXV



ARBITRATION AND EXPERT EVALUATION



55



XXVI



TERMINATION



57



XXVII



BANK GUARANTEE



59



XXVIII



NOTIFICATION



60



XXIX



APPLICABLE LEGISLATION AND

STABILIZATION



61



XXX



INFRASTRUCTURE



62



XXXI



GUARANTEE OF PARENT COMPANIES



63



XXXII





FINAL PROVISIONS



64

-ii-





APPENDICES

APPENDIX A:



COORDINATES OF THE CONTRACT AREA



APPENDIX B:



MAP OF THE CONTRACT AREA



APPENDIX C:



BANK GUARANTEE



APPENDIX D:



ACCOUNTING



APPENDIX E:



ABANDONMENT PROCEDURES



-iii

PREAMBLE

WHEREAS:

In accordance with Ordinance No. 73-33 of April 13, 1973, concerning the

Petroleum Code of the Republic of Benin as well as the texts issued thereafter,

in particular Ordinance No. 73-34 of April 13, 1973, concerning oil taxation and

Decree No. 73-130 of April 13, 1973 concerning the application of the Petroleum

Code, the exploration, exploitation, stocking, transport and marketing of

Hydrocarbons in the territory and in the territorial waters of the Republic of

Benin and on the continental shelf adjacent thereto, shall be subject to the

provisions of said Ordinance which furthermore stipulates that the liquid and

gaseous Hydrocarbon fields belong to the State and constitute assignable mineral

substances.

In accordance with Article 10 of said Code, the State may undertake any

Petroleum Operations either solely, or in association with private capital; and

may as well assign to itself or to any department or public company with legal

status, the exploration and exploitation permits, the concessions and

provisional exploitation permits.

In accordance with Article 8 of the Code, the State of Benin may also grant

petroleum rights to physical or legal entities.

In accordance with Article 17 of the Code, prior to granting a Hydrocarbon

Exploration permit, the Minister in charge of Mines shall enter into a contract

with persons having the required technical and financial capabilities necessary

to undertake such activities, define the rights and obligations of the future

permit holder during the exploration and the exploitation periods.

Further to the above, the Government of the Republic of Benin has decided to

enter into the present Contract with the ADDAX PETROLEUM-ABACAN BENIN

Consortium, a company incorporated and registered under the laws of the Republic

of Benin, with a head office in Cotonou, Republic of Benin, for the purpose of

exploration and exploitation of Hydrocarbons in accordance with the articles and

provisions specified in the present Contract.

IN



WITNESS



WHEREOF:



The undersigned Parties represented, by MR. EMMANUEL GOLOU, MINISTER OF MINES,

ENERGY AND HYDRAULICS on one part and by MESSRS. MARC LORENCEAU, PRESIDENT OF

ADDAX PETROLEUM BENIN AND WADE CHERWAYKO, PRESIDENT OF ABACAN RESOURCE LIMITED

(BENIN) agree as follows:

-1

ARTICLE 1

DEFINITIONS

The terms appearing hereinafter in the Contract shall be defined as follows,

unless specifically indicated otherwise, or unless the Parties mutually agree

otherwise. The definitions shall include the singular and the plural forms.

1.1

"Affiliate" or "AFFILIATED COMPANY" means a company or any other

entity which controls one or several entities forming the Contractor, or which

is controlled by one or several entities forming the Contractor, or which is

controlled by an entity which itself controls the Contractor. Control means

direct or indirect ownership of more than fifty percent (50 %) of the shares



making up the capital of the controlled Company, thereby granting the majority

of the voting rights in the controlled Company to the controlling Company.

1.2

beginning



on



1.3

from the

signature



"CONTRACT YEAR" means a period of twelve (12) consecutive months

Effective Date of the Contract or the anniversary of the date of

.



1.4

integral

Contract

prevail.



"CALENDAR

January



YEAR" means a period of twelve (12) consecutive months

first and ending on the following December thirty-first.



"APPENDIX" means an appendix to the Contract and forming an

part thereof. If there is a disagreement or a conflict between the

and any of the appendixes, the provisions of the Contract shall



1.5

established



"ACCOUNTING APPENDIX"

in Appendix "D".



means the accounting procedures and methods



1.6

"ARTICLE" means any numbered provision of the Contract, including

all its subdivisions, unless it is expressly indicated that it means an article

of the Code.

1.7

of Crude oil

temperature

atmospheric



"BARREL" means U.S. Barrel, which is a quantity or unit of measure

equivalent to 158.9884 litres or 42 American gallons, measured at a

of 15.5556 degrees Centigrade or 60 degrees Fahrenheit and at

pressure.



1.8

"AVAILABLE CRUDE" means the quantity remaining after the losses

relating to the Petroleum Operations and the Government Royalty have been

subtracted from the Total Crude Production in the contract area in accordance

with Article 13.4 hereinafter.

1.9

Petroleum

1.10

of the



"COST-OIL"

Costs.

Cost



means



"PROFIT-OIL"

Oil.



the volume of Crude dedicated to the recovery of



means



the Crude remaining each year after deduction



-2

1.11

contained



in



"BUDGET" means the financial estimate of all petroleum activities

an Annual Work Program.



1.12

"CODE" means Ordinance No. 73-34 of April 13, 1973 concerning the

Petroleum Code of the Republic of Benin as well as subsequent texts, in

particular Ordinance No. 73-34 of April 13, 1973 concerning the petroleum

taxes, and Decree No. 73-130 of April 13, 1973 concerning the application of the

Petroleum Code.

1.13

"CONTRACTOR" means the consortium ADDAX PETROLEUM-ABACAN BENIN and

their successors and/or any assignee granted any of their contractual rights ,

the assignment being in accordance with Article XXIII.

1.14

signed

agreed



"CONTRACT" means the present document as originally drawn up, duly

including its Appendixes as well as any additions or any amendments

by the Parties at a later date.



1.15

carrying

occurred

1.16

Petroleum

with the



"PRODUCTION COSTS" means the costs and expenses resulting from

out the Production Operations excluding new investments having

during that phase.

"PETROLEUM COSTS" means all the costs and expenses related to

Operations as specified in the Accounting Appendix and in accordance

Contract.



1.17

Exploration



"EXPLORATION

operations.



COSTS"



means



the costs and expenses related to the



1.18

Development



"DEVELOPMENT

Operations.



COSTS"



means



the costs and expenses related to the



1.19

"DATE OF START-UP OF COMMERCIAL PRODUCTION" means the date of the

first delivery of Hydrocarbons in commercial quantities to the delivery point in

Benin.

1.20

signed



"EFFECTIVE DATE" means the date on which the present Contract is

the authorized representatives of both Parties.



by



1.21

"DISCOVERY" means uncovering the presence of Hydrocarbons in a

reservoir or geologic structure where such Hydrocarbons had not been previously

identified, resulting from the Petroleum Operations in accordance with the

Contract, and when these Hydrocarbons are recoverable by conventional methods

used in the international oil industry. "COMMERCIAL DISCOVERY" means a Discovery

of Hydrocarbon reserves following Exploration Operations, which is deemed

commercial in accordance with the provisions of Article IX.

1.22

generally



"CURRENCY" means any foreign currency freely convertible and

accepted by the international banking community.

-3-





1.23

America.



"DOLLARS"



1.24



"FCFA"



1.25

geophysical



means



means



the



the



official



official



currency



currency



of



of the United States of

the Republic of Benin.



"DATA" means any document, report and information of a geological,

or petrophysical nature in the Contract Area.



1.26

"EXPATRIATE EMPLOYEE" means an employee of the Contractor or of a

subcontractor who has been recruited for that purpose and assigned to the

Petroleum Operations in Benin.

1.27

"STATE" means the Republic of Benin,

administrative structures and any subdivisions and



its Government, its

political institutions.



1.28

"EXPLORATION" means the planning, execution and evaluation of any

type of geological, geophysical, geochemical and other studies, as well as the

drilling of Exploration Wells for the purpose of making a Hydrocarbon Discovery.

1.29

time



as



"ASSOCIATED

Crude Oil.



GAS"



means the Gas extracted from a well at the same



1.30

"NATURAL GAS" or "GAS" means the Hydrocarbons in the gaseous state

under normal atmospheric pressure and temperature, including but not limited to,

the wet gas, the dry gas, the wellhead gas and any other gaseous hydrocarbons,

including the residual gas after condensation or extraction of liquids, but not

including said condensates or extracted liquids.

1.31

"NON-ASSOCIATED GAS" means the Natural Gas which is not produced

at the same time as the Crude Oil or which exists jointly with Crude Oil which

cannot be commercially produced when said Natural Gas is commercially produced.

1.32

"GAS FIELD" means one or several accumulations of Natural Gas

superposed vertically in the Contract Area, having a commercial value

established in accordance with the Good Operating Practices of the Oil Industry.

1.33



"OIL



FIELD"



means



an



accumulation



of



Crude



Oil,



or several



accumulations of Crude Oil superposed

having a commercial value established

Practices.



vertically in

in accordance



the Contract Area and

with Good Oilfield



1.34

"GOVERNMENT" means the body including all the State Ministers. In

the present contract, this means the Government of the Republic of Benin, its

representatives or authorized agents.

1.35



"HYDROCARBONS"



1.36

except

Benin,



means



Crude



Oil



and/or



Natural



Gas.



"WORKING DAY" means every working days from Monday to Friday,

for the days declared in full or in part non-working days in Cotonou,

by the authorized government agencies.

-4-





1.37

Republic



of



"MINISTER"

Benin.



means



the



Minister



in charge of Hydrocarbons in the



1.38

"EXPLORATION OPERATIONS" means the operations performed in

accordance with the Contract for the purpose of discovering Hydrocarbon

accumulations and evaluating the extent and the volume of these accumulations,

the Reservoirs characteristics and their probable behavior during production.

The Exploration Operations include geological, geophysical and geochemical

surveys, analyses and studies, the drilling, deepening, abandonment or workover

of the wells and their evaluations as well as any operations relating thereto.

1.39

"DEVELOPMENT OPERATIONS" means any operations performed according

to the General Development Program for the purpose of producing the Hydrocarbon

accumulations in the subsurface of the Development Areas. These Operations

include:

- and



The drilling, completion and sampling of development wells, the

completion of wells for gas or water injection;



drilling



- The laying of gathering lines, the installation of separators, tanks,

pumps, compressors and other production and injection facilities required for

the production, treatment and transportation of Hydrocarbons to the Hydrocarbon

storage facilities or to the offshore or onshore gas processing facilities; and

- The pipe laying inside or outside the Contract Area towards the storage or

delivery points, the building of these Crude Oil storage facilities or Gas

processing facilities and all ancillary operations that are not specifically

indicated herein but which are necessary for the development and production of

these Hydrocarbon reserves and for the delivery of Crude Oil and/or of the Gas

to the Delivery Point, in accordance with the Good Operating Practices of the

Oil Industry.

1.40

"PETROLEUM OPERATIONS" means all operations authorized by the

Contract related to the exploration, development, production, separation and

processing, storage, transportation and sale or transfer of Hydrocarbons to the

exportation point or to the Delivery Point agreed to in Benin or to the delivery

point to a Benin refinery in accordance with the Contract; they cover the

Natural Gas processing operations but do not include the Crude Oil refining

operations.

1.41

"PRODUCTION OPERATIONS" means the operations undertaken in order

to produce the Hydrocarbons of the Contract Area such as extraction, injection,

stimulation, processing, storage, transportation to the Delivery Point(s),

loading, including the export of these Hydrocarbons as well as the maintenance

and abandonment of all the necessary facilities.

1.42



"PARTIES"



means



the



Government



and



the



Contractor.



-5

1.43

from the



"TRANSITIONAL PERIOD" means the maximum period of three (3) months

date of signature of the Contract which is the Effective Date.



1.44

"CRUDE OIL" means the crude mineral oil, asphalt, ozokerite and

all other types of Hydrocarbons and bitumen in the solid or liquid form, in

their natural state or obtained from Natural Gas through condensation,

separation or extraction.

1.45

"DELIVERY POINT" means the final exit Point of the Flowlines

downstream of the storage facilities from where the Oil or Gas is delivered for

shipment. The location of the Delivery Point shall be agreed to between the two

(2) Parties.

1.46

"COMMERCIAL PRODUCTION" means the quantity of Crude Oil or Natural

Gas, or both, which may be delivered to the Delivery Point according to a

regular production and sale schedule.

1.47

"TOTAL CRUDE PRODUCTION" means the quantity of Crude extracted

from the Contract Area after extraction of the water, of foreign substances and

after deduction of the quantities used in the Petroleum Operations.

1.48

through



the



1.49

development



"WORK PROGRAM" means

Petroleum Operations.



all



plans



prepared



every



year to carry



"GENERAL DEVELOPMENT PROGRAM" means a plan established for the

of an Oil Field

or a Gas Field agreed to between the Parties.



1.50

"EVALUATION WELL" means a well, other than an exploration well,

drilled in order to evaluate the commercial viability of a geologic trap where

hydrocarbons have been discovered.

1.51

"EXPLORATION WELL" means any well drilled within the framework of

the Exploration Operations including dry wells and discovery wells.

1.52

Hydrocarbons

increase or

wells.



"DEVELOPMENT WELL" means a well drilled in order to produce

from a Reservoir which has been evaluated and tested, to maintain,

accelerate the production, including the production and injection



1.53

"CONTRACT AREA" means all the geographic area defined by the

perimeter for which the coordinates appear in Appendix "A" and which are drawn

on the map appearing in Appendix "B", with the exception of any part which the

Contractor has, from time to time, abandoned or relinquished according to the

Contract.

1.54

efficient



"GOOD OPERATING PRACTICES" means all good, safe, economic and

practices generally accepted in the international oil industry.



1.55

"RESERVOIR" means the subsurface rock containing hydrocarbons in

its pores and having a common pressure system in its volume. This rock body

must be capable of producing hydrocarbons in measurable quantities.

-6

1.56

"BASEMENT" means on the one hand, the igneous, metamorphic or

other rocks which, by their nature, and in accordance with the knowledge

generally accepted in the international oil industry, cannot contain Hydrocarbon

accumulations, and on the other hand, the impenetrable rocky substances such as

salt and clay domes as well as any other rock which may render impracticable or

unjustifiable from an economic point of view the continuation of drilling

activities using modern drilling technology normally used in the international



oil



industry.



1.57

"SUBCONTRACTOR" means any physical person or legal entity hired by

the Contractor to provide services related to the Contract.

1.58

"LIBOR RATE" means the interest rate at closing for the dollar

deposits for a period of six (6) months on the London interbank market as

published by the London branch of "The Bank of America" or by any other bank

agreed to between the Parties, on the date in question or on the banking day

immediately preceding if the day in question is not a banking workday in London.

1.59



"CONTRACT



1.60

equals



12.5%



INTEREST



RATE"



is



"LIBOR



RATE"



plus



one



percent.



"OIL PRODUCTION TAX" means the Royalty as defined in the Code, and

of the Total Crude Production.



1.61

"QUARTER" means a period of three (3) consecutive months from

January first, April first, July first and October first respectively in each

Calendar Year.

1.62

"THIRD PARTIES SALES" means the sales of Hydrocarbons produced in

the Contract Area and fulfilling the following conditions:

(A)



The agreed price shall be the sole consideration for the sale;



(B)



The sale conditions shall not depend on any trade relation other than

that created by the actual sale Contract between the seller and the

buyer or any of their Affiliates;



(C)



Neither the seller nor any of its Affiliates has a direct or indirect

interest in the resale or subsequent assignment of the Hydrocarbons or

of any derived product;



(D)



These sales agreement

barter agreement.



1.63



a)



must not



include a



processing,



exchange or



"DEVELOPMENT AREA" means the part of the Contract Area which,

following the seismic information and the well data available, is

reasonably deemed to cover the plan area of a Hydrocarbon accumulation

constituting a Commercial Discovery and designated as such in an

approved General Development Program. The Development Area includes

the depth corresponding to the reservoirs that have been evaluated and

tested between the surface and the basement.

-7-





b)



THE "BLOCK 4 AREA" OR "BLOCK 4" is defined by the area delimited by

the points MFON for which the geographic coordinates and a map are

shown in Appendix B, the 200 metres water depth being the northern

boundary, the border between Benin and Nigeria being the Eastern

boundary, the 3000 metres water depth being the southern boundary and

the border with Togo being the western boundary of said Block 4.

-8-





ARTICLE II

OBJECT OF THE CONTRACT

2.1

By the present Contract, the Government grants to the Contractor

the exclusive right to carry out Petroleum Operations in the Contract Area for

the purpose of exploring, developing and producing Hydrocarbons in this area, in



accordance with the provisions of the Code and the Contract, and in accordance

with the laws and regulations in force in the Republic of Benin. The State

shall implement all administrative procedures required to enable the Contractor

to enjoy its rights and fulfill its obligations.

2.2

The Contractor declares having the technical and financial

capabilities required and undertakes to carry out all the Petroleum Operations

in accordance with the present Contract and with the Good Operating Practices

of the Oil Industry.

2.3

Once a General Development Program regarding a Hydrocarbon

Discovery has been approved in accordance with the terms of the Contract, the

Contractor shall have full rights to carry Development and Production

Operations and to enjoy the financial benefits resulting from these activities,

provided that its obligations under the Contract and the Code have been

fulfilled.

2.4

The Contractor shall provide all technical, financial, human and

economic resources required for the Petroleum Operations. Subject to the

possible proportional participation of the State, all costs and disbursements

incurred for the Petroleum Operations shall be the responsibility and the

exclusive charge of the Contractor. Furthermore, the Contractor is technically,

financially and economically responsible for the Petroleum Operations during the

validity period of the Contract.

2.5

The Minister, in his capacity as the Government representative,

shall be responsible for the supervision of the Petroleum Operations in order to

ensure that the Contractor fulfills its obligations in accordance with the

Contract. The Minister shall exercise this duty through its technical

departments at any reasonable time. The Contractor shall be required to provide

easy access to his facilities to the Minister's representatives in order to

enable them to discharge their duties. The costs related to these duties shall

be borne by the Government.

-9

ARTICLE III

TERM

3.1

The Contract shall be in effect starting from the date of its

signature and shall end on the date fixed hereinafter, subject to the provisions

of Article XXVI relating to its termination.

3.2

exploration



The period covered by the Contract is divided into two periods:

period and an exploitation period.



an



3.3

The exploration period shall be for an initial period of three (03)

years, with two (2) possible extension periods of two years each. These

extensions shall be granted by right, subject to the provisions relating to

relinquishments, provided that the Contractor has met all its work obligations,

expenditures and other substantial obligations relating to the preceding phase.

3.4

Provided it has fulfilled all the requirements relating to the

initial phase, the Contractor may request the Minister in writing for an

extension of the exploration period beyond the initial phase, at least sixty

(60) calendar days before the end of said phase. If this request has not been

submitted in time and if a commercial Discovery has not been made, the Contract

shall expire at the end of the initial phase of the exploration period.

3.5

Subject to the provisions relating to termination and or provided

no Hydrocarbon Discovery has been made during the exploration period, the

Contract shall expire at the end of this period. If at least one (1) Commercial



Discovery has taken place before the end of the exploration period, the Contract

shall remain in effect with regard to the corresponding Development Areas.

3.6

If, at the expiration date of the initial exploration period or of

one of the extension phases, an exploration well is in the process of drilling,

coring, casing, testing or abandonment, the Minister shall grant to the

Contractor a special extension in order to enable it to complete the drilling,

coring, casing, testing and/or the abandonment of the well in question, to

evaluate the results of these operations and to determine if they constitute a

Hydrocarbon Commercial Discovery. This special extension cannot, under any

circumstances, extend the total exploration period by more than six (6) months.

3.7

special



If at the date of expiration of the exploration period or of a

extension period, the Contractor is in the process of:



- preparing a first report of discovery

according

to article 9.2



or a report detailing a Discovery



-10

- to execute an evaluation program in accordance with a schedule of activity

according to the article 9.3, the Minister will eventually grant to the

Contractor a special extension so that he can take to term the evaluation of the

Discovery and submit a detailed evaluation report. This special extension may

not exceed 3 months unless Parties decide otherwise.

3.8

If , at the date of expiration of the exploration period, or of a

special extension period, the Contractor submitted to the Minister a detailed

evaluation report justifying the commercial viability of the Discovery according

to article 9.3, the exploration period or if the case arises the special

extension period ends according to the date of approval of the Minister's

report according to article 9.5 of the Contract.

If at the date of expiration of the exploration period or a special

prolongation period, the Minister rejects the report of the Contractor

indicating that there is no viability of the Discovery and submits the question

to an Expert according to article 9.5 of the Contract, the exploration period,

if the case arises, the special prolongation period will be extended until:

i)



the arrival date of the expert's

the Contractor



decision



confirming



ii)



Thirty (30) days after the decision of the expert

states that the Discovery is commercially viable.



the opinion of



where the decision



3.9

If a Natural Gas Discovery occurs that the Contractor considers as

having the potential of being commercially viable, in addition to the procedures

and conditions specified herein, the Minister may grant to the Contractor a

special extension of the initial exploration phase for a minimum period of two

(2) years to allow the full evaluation of this Discovery. To this effect, the

Minister may ask the Contractor to carry out additional studies or works which

would reasonably appear necessary for the good evaluation of the Natural Gas

Discovery.

3.10

In the event of a Commercial Hydrocarbon Discovery, the

Government shall grant to the Contractor by right, at the request of the latter,

an exploitation permit covering the Development Area, the perimeter of which

will have been approved as part of a General Development Program in accordance

with Article IX. The duration of the exploitation permit during which the

Contractor shall be authorized to assume the production of each of the Oil

Fields and Gas Fields discovered shall be fixed at twenty-five (25) years from

the day on which the Discovery has been declared a Commercial Discovery in

accordance with the provisions of Article IX hereof.



Subject to Government approval, during the period of the Contract, the

Contractor may relinquish one or several Development Areas which are the object

of an exploitation permit.

3.11

If, at the expiration of the twenty-five (25) year exploitation

period defined above, a commercial exploitation remains possible, the Contractor

may be authorized, at its request, to continue the exploitation for a further

period of ten (10) years, provided that it has fulfilled all its contractual

obligations during the preceding exploitation period.

-11

3.12

At the expiration of the last exploitation permit granted to the

Contractor, the rights and obligations defined in the present Contract

concerning exploitation shall be null and void.

3.13

For the purpose of granting an exploitation permit, the

Contractor shall provide to the Government an exact delimitation of the

perimeter in such a manner that it includes all the presumed area of the

discovered Field.

3.14

If, during subsequent work, it appears that the field has an

extension greater than that initially anticipated according to the preceding

paragraph, the Government shall grant to the Contractor, under the exploitation

authorization already allocated, the additional area in such a way to cover the

whole of the field, provided that the above mentioned extension forms an

integral part of the Contract Area as defined at the time of said modification.

If the additional area is outside the Contract Area, the Minister shall grant to

the Contractor this additional area provided that it is not the subject of

mining rights already granted to a third party or of a request for such rights.

-12

ARTICLE IV

OWNERSHIP OF ASSETS, DATA AND HYDROCARBONS

4.1



OWNERSHIP



OF



ASSETS



4.1.1

The lands shall become the property of the State as soon as they are

acquired by the Contractor. The Minister must cooperate in order to complete

the procedures on behalf of the Contractor and at the written request of the

latter, for obtaining the licenses, permits, surface rights, easements, rights

of free access and exit from the Contract Area, the utilization of the waters

and any other types of encumbrances on any land or water expanse of public or

private nature to enable the Contractor to conduct Petroleum Operations on the

territory of Benin, in accordance with the laws in force in the country.

4.1.2

Notwithstanding the above provisions, the ownership of movable

and immovable properties acquired by the Contractor for the Petroleum Operations

shall be automatically transferred by the Contractor to the State as soon as

their cost has been fully amortized by the Contractor, or, otherwise, at the end

of the Contract. At the expiration of the Contract, the Contractor shall be

required to forward to the Beninese State, through the Minister and unencumbered

of any charges, the ownership of the lands, works, facilities, appurtenances and

permanent equipment which it shall have acquired during the performance of the

Petroleum Operations. The Contractor shall then be released from any obligation

including any obligations regarding

abandonment and environmental restoration,

with regard to said properties in the event that field operations would

continue. During the period of validity of the Contract, the Contractor shall

keep and safeguard in a good condition the movable and immovable properties

acquired for the execution of the Operations.



4.1.3

The ownership of the properties rented or of the movable properties

leased and of intellectual property belonging to subcontractors or to Affiliates

and intellectual property belonging to third parties shall remain with said

Subcontractors, Affiliates or third parties.

4.1.4

During the period of the Contract, the Contractor shall be authorized

to use all movable and immovable properties acquired for the Petroleum

Operations under the Contract. The Contractor shall be authorized to transfer

or to sell said properties if they are no longer required for the Petroleum

Operations. The beneficiary of the revenues from the sale of these properties

shall be as follows:

.



If the ownership of said properties has been transferred to the State,

the proceeds must be paid to the latter.



.



The Contractor shall keep these revenues when the properties have not

been the subject of any amortization.



.



In the event of partial amortization, the proceeds corresponding to

the amortization proportion must be paid to the State.



-13

The disposal or transfer of movable or immovable properties during the period of

the Contract must have the prior approval of the Minister.

4.2



OWNERSHIP



OF



DATA



The State is the owner of all the geological, geophysical and geochemical

information and of the data relating to the drilling, engineering, recording and

production of any other data, samples, logs, cores, tapes, maps,

interpretations, reports and any other support or information obtained as a

result of Petroleum Operations. However, the Contractor shall be authorized to

keep this information, at no cost, and to use same for the Petroleum Operations

subject to the obligations connected to their confidential nature.

4.3



OWNERSHIP



OF



HYDROCARBONS



All the Hydrocarbons contained in the Reservoirs of the subsurface of the

Contract Area or produced in the Contract Area belong to the State in accordance

with the Code and with the Constitution of the Republic of Benin. The Contract

does not confer any ownership right on the Contractor with regard to the Crude

Oil and/or Gas extracted from the Contract Area, which shall continue to be the

property of the State until they are measured at the Delivery Point. The

ownership rights of the Contractor with regard to the Crude Oil and/or to the

Gas in accordance with the provisions of the Contract shall be granted to it at

the appropriate Delivery Point.

-14

ARTICLE V

RELINQUISHMENTS OF SURFACE AREA

5.1

At the end of the first extension phase of the exploration period

or its extension and provided the Contractor has discharged all its obligations

corresponding to this phase, if the latter decides to continue with the

Exploration Operations in the Contract Area according to article 3.4, it shall

relinquish thirty percent (30%) of the remaining Contract Area, after deduction

of any Development Area.

5.2

the



At

Contractor



the end of the last extension phase of the exploration period,

shall only keep the Development Area or Areas if any.



5.3

The Areas that have been relinquished by the Contractor must be

connected together and must be of an appropriate geometrical form which allows

the performance of Petroleum Operations by other entities. The Contractor must

notify the Minister in writing of the Area or Areas it intends to relinquish, no

later than sixty (60) days before the end of the period considered, and shall

include a map showing the geographic location and giving the coordinates of the

apexes of the boundary lines. Within thirty (30) days following the

notification date, the Minister must inform the Contractor of its decision and

the Contractor must comply therewith.

5.4

assumed



From

have



to



the date of expiration

transferred all of the



of the Contract, the Contractor is

Contract Area.



5.5

After two months following each relinquishment, the Contractor must

report to the Minister the surface areas to be returned and forward to him all

related documents and files as well as the facilities , with the possibility of

making copies of the documents and files subject to confidentiality conditions.

-15

ARTICLE VI

WORK OBLIGATIONS

6.1

Effective



The Contractor must commence

Date of the present Contract.



the Petroleum Operations as of the



To that end, the Contractor shall inform the Minister of the nominal

composition of the team responsible for the conduct and execution of the

Contract in Benin as well as the main terms of its agreement with its partner or

partners.

6.2

years,



the



-



Acquisition of 3000 km of 2D seismic lines.



-



Reprocessing of 600 km of seismic lines(optional).



-



Propose a drilling program to the Government.



6.3

must



at



During the

least perform



first extension phase of two (2) years, the Contractor

the following:



-



Acquire fifteen

equivalent;



-



Drilling of a well to a depth of 3500m TVD (true vertical depth)



6.4

period,



6.5

the



During the initial Phase of the exploration period of three (3)

Contractor shall undertake to do the following tasks:



the



hundred



(1500) km of



seismic



or their 3D



seismic



During the second extension of the initial phase of the exploration

Contractor must at least complete the following tasks:



-



Acquisition of 1000 km of 2D seismic lines .



-



Drilling of a well at a depth of 3500m TVD (True vertical depth)



following



Any Exploration

depths:



Well drilled must at least be drilled to one of



(a)



A geologic formation of lower Cretaceous age:



(b)



The basement;



(c)



Three thousand five hundred (3500) m TVD (True Vertical Depth)



(d)



a depth below which any additional drilling becomes impracticable and

would not be carried out by a prudent and reasonable operator in

identical or similar conditions according to the Good Operating

Practices of the Oil Industry.

-16-





(e)



at any other depth defined by the Parties by mutual agreement.



6.6

If during a phase of the exploration period the Contractor

undertakes tasks which exceed the minimum work obligations relating to this

phase, the excess shall be deducted from the work obligations of the following

phase.

6.7

provisions

provisions



The difficulties which shall occur during the implementation of the

of this Article shall first be settled in accordance with the

of Articles 8.2.2 and 9.9.

-17-





ARTICLE VII

TECHNICAL COMMITTEE

7.1

Within three (3) months following the Date of signature of the

Contract, the Parties shall form a Joint Technical Committee (JTC) composed of

six (6) members, three (3) representing the Minister and three (3) representing

the Contractor, including the General Manager.

7.2

Notwithstanding the provisions of Article 2 and the rights and

obligations of the Contractor relating to the daily management of the Petroleum

Operations, nor its other rights and obligations mentioned in the Contract, the

JTC shall have the main following objectives:

-



To ensure the good communication and cooperation between the Parties.



-



To review and to decide on the conduct and management of the Petroleum

Operations, in particular:

(i)



the evaluation of the results of the drilling,

geophysical and petroleum engineering programs,



geological,



(ii) the budgets and their implementation,

(iii) important modifications to the work programs,

(iv) allocation of markets relating to the work programs,

(v)



any other matters submitted by the Parties.



On all the matters reviewed the JTC shall make and forward

to the Parties.

7.3

The JTC

by the Minister. One

act as Secretary. The

the JTC as experts



recommendations



shall be chaired by one of the representatives designated

of the representatives designated by the Contractor shall

Parties may send other representatives to the meetings of

or substitute members.



7.4

The JTC shall hold an ordinary meeting at least once every six (6)

months or when the members decide to do so by mutual agreement. The Chairman

of the JTC may convene extraordinary meetings at the request of the Minister or



of the Contractor by giving to the members at least fifteen (15) days notice, or

a shorter notice if the Parties so decide. The corresponding notice must

indicate the date, the place and the agenda of the meeting.

7.5

(4)



members



The quorum for the meetings of the JTC shall be composed of four

including two (2) for each Party.



-18

7.6

The JCT shall submit the result of its meetings to the Parties. In

the event of disagreement between the Parties, they will react in accordance

with the provisions of the present Contract.

-19

ARTICLE VIII

COMPLETION OF THE OPERATIONS,

WORK PROGRAM, BUDGETS, REPORTS

AND CONTROL

8.1



COMPLETION



OF



THE



OPERATIONS



8.1.1

During the period of the Contract, the Contractor shall carry out

directly the exploration and exploitation activities in the Contract Area. In

order to better undertake its activities, it shall be authorized to hire

specialized subcontractors. However, the Contractor shall keep the control and

the general responsibility of the operations or activities undertaken.

8.1.2

The Contractor must proceed diligently with the performance of the

Petroleum Operations in accordance with the Good Operating Practices of the Oil

Industry, taking into account the local conditions and other particular

conditions in the Contract Area.

8.1.3

The Contractor must notify in advance the Minister of all substantial

and planned Petroleum Operations such as, for example, the geological or

geophysical surveys and the start-up of well drilling activities. The

Contractor must also notify the Minister in writing of any suspension of

drilling or well abandonment. If this notification is impossible, the

Contractor must notify the Minister in writing of this suspension or abandonment

within twenty-four (24) hours.

8.2



WORK



PROGRAM



AND



BUDGETS



8.2.1

Within ninety (90) days following the Effective Date of the Contract,

the Contractor must prepare the first Work Program and its budget. If the

Effective Date of the Contract occurs the first day of the month of July or

before, the first Program and its budget shall be prepared for the remainder of

the corresponding Calendar Year. If the Effective Date of the Contract occurs

after the first day of the month of July, this first Program and its budget

shall be prepared for the current Calendar Year as well as for the following

Calendar Year. The Contractor must submit the Work Program and its budget to

the Minister's approval. Subject to the above provisions, the Contractor shall,

no later than October 30 of each calendar year, prepare a Work Program and a

budget for the following calendar year and submit same for the Minister's

approval. Within the month following the date of receipt of the Work Program

and of the budget, the Minister shall approve same as proposed or shall suggest

amendments, failing which the Work Program and the budget shall be deemed

approved. The Work Programs during the exploration period must include the

minimum work program as stipulated in the present Contract.

-20-





8.2.2

In the event that the Minister wishes to make amendments to the Work

Program and to the corresponding Budget, he must advise the Contractor thereof

in writing no later than fifteen (15) days following the receipt of the

documents mentioned above and the Parties shall meet and attempt to reach an

agreement on the proposed amendments. If the Contractor and the Minister do not

reach an agreement on the proposed amendments no later than two months after the

date of receipt of the Work Program and budget, an Expert shall be called upon

to settle the question in accordance with the provisions relating to arbitration

and expert evaluation.

8.2.3

The Contractor may, with the Minister's approval, revise the Work

Program during the Calendar Year in question in order to be able to take into

account newly acquired information, a revised evaluation of the existing

conditions, or any other valid reason.

8.3



REPORTS



8.3.1

Within the framework of the present Contract, the Contractor shall

prepare and keep up to date all the records relating to the Petroleum Operations

in the Contract Area.

8.3.2



Subject



to



its general rights and obligations, the Contractor shall:



(a)



Register in an original or reproducible version of good quality, or

eventually on magnetic support,

any geological and geophysical

information and any data related to the Contract Area and acquired by

the Contractor.



(b)



Keep all the files containing all the details concerning the following

aspects:

i)



The drilling,

implementation,

deepening,

plugging or abandonment of the wells;



ii)



The formations penetrated by the wells;



production



tests,



iii) The casing laid in the wells and any modification to said casing;

iv)



Any hydrocarbons, water and other minerals of economic value or

dangerous substances encountered;



v)



The areas in which geological or geophysical activities have been

carried out.



8.3.3

The well logs, maps, magnetic tapes, cores and samples, and other

geological and geophysical information obtained by the Contractor during the

Petroleum Operations belong to the Government, and shall be forwarded to it as

soon as they have been obtained or prepared, the Contractor having the right to

make copies of said documents and files, subject to the observance of the

confidentiality provisions.

8.3.4

Parties

a)



During the execution of its contractual

otherwise agree, the Contractor may:



obligations,



unless the



Keep copies of the material constituting the Data during the period of

the Contract.

-21-





b)



Keep the original data for a period required for Petroleum Operations,

with the Government approval,

provided that said data can be

reproduced and that copies thereof have been provided to the Minister.



c)



Export for processing, review or laboratory tests and for a period of

one year, the samples and any matters constituting the Petroleum Data,

provided that samples of equivalent dimensions and quality or, when

such data may be reproduced, copies of an equivalent quality have been

forwarded to the Minister.



8.3.5

The Contractor shall regularly inform the Minister of the major

developments occurring in the Petroleum Operations and shall provide him with

all available information, data, reports, evaluations and interpretations

relating to the Petroleum Operations. Furthermore, the Contractor shall:

a)



Prepare daily drilling reports within the framework of its activities;



b)



Prepare and forward to the Minister a monthly report within a period

of fifteen (15) days following the end of the month concerned, which

shall include a description of the activities covered during said

month with plans and maps indicating the sites where the tasks

described have been executed;



c)



Prepare and forward to the Government a quarterly report, within

thirty (30) days after the end of each Calendar Quarter, which shall

include a description of the activities covered during said quarter

with plans and maps indicating the sites where the tasks described

have been executed;



d)



Prepare and forward to the Government an annual report, within two (2)

months after the end of each Calendar Year, which will integrate and

develop if necessary the revised quarterly reports of the Calendar

Year considered.



8.4

The Minister shall assume his obligations under the present

Contract through the DIRECTION OF ENERGY (DEN) and the DEPARTMENT OF PETROLEUM

OPERATIONS (BOP).

8.4.1



The



duties



of



THE DIRECTION OF ENERGY (DEN) shall be in particular:



-



to ensure that the Petroleum Operations conducted by the Contractor or

other government entities comply with the petroleum policy of the

State and with appropriate laws and regulations;



-



as much as feasible to bring to the Contractor any assistance required

in order to allow it to fulfill its obligations within the framework

of the present Contract;



-



to ensure

that the

Contractor

implements

a

technological transfer and of training of Beninese

field of Petroleum Operations.



true policy of

nationals in the



8.4.2

The duties of THE DEPARTMENT OF PETROLEUM OPERATIONS (BOP) shall be in

particular:

-22

-



to guarantee the financial

State;



settlements between the Contractor and the



-



to receive, value and market the State's Hydrocarbon share;



-



to ensure that the cost accounting of the expenditures and the keeping

of the records and of the performance reports of the Petroleum

Operations are undertaken according to the present Contract and

according to the generally accepted accounting principles of the oil

industry.



-23

ARTICLE IX

DECLARATION OF COMMERCIAL DISCOVERY

AND DESIGNATION OF THE DEVELOPMENT AREA

9.1

Area, the

provisions

Discovery,

conflict or



As soon as a Discovery of Hydrocarbons is made in the Contract

Contractor must immediately report it to the Minister and the

of the present Article shall then apply. In the event of a Gas

the provisions of the relevant Article shall apply if there is a

a difference with the present Article with regard to this Discovery.



9.2

After the Discovery of Hydrocarbons and as soon as it is able to do

so, and in any case within thirty (30) days following said Discovery, the

Contractor must forward to the Minister a first report of Discovery.

No later than two (2) months following the Discovery, the Contractor shall

forward to the Minister a detailed report on the Discovery, indicating whether

this Discovery must be evaluated or not. If the Contractor deems that the

Discovery is worth being evaluated, the report must include an evaluation

program and a schedule of activities in order to implement an adequate and

efficient evaluation. The Contractor must carry through the evaluation program

submitted to the Minister during the exploration period in accordance with the

approved evaluation program and schedule of activities.

9.3

No later than ninety (90) days following the end of the evaluation

program, the Contractor shall submit to the Minister a detailed evaluation

report demonstrating the commercial viability of the proposed Development Area.

The present report must include:

-



The description of the Development Area, in particular the structural

configuration, the physical properties and the extent of the reservoir

rocks, the areas, thicknesses and depths of the producing zones;



-



An estimate of the initial and recoverable oil and gas reserves, the

characteristics of the recovery, the expected recovery rate for each

reservoir;



-



An estimate of the number of wells required for an efficient drainage

of the reserves, the fluid characteristics including, in the case of

Crude Oil, the density, the sulfur content, the sediment and water

content and the shrinkage characteristics of the product;



-



The economic forecasts and the expected cash flows.



9.4

The Contractor must declare in the report whether the Discovery is

commercially viable, and in this case, it shall be entitled to develop same and

to produce the Hydrocarbons in accordance with the provisions of the present

Contract.

-24

9.5

Within thirty (30) days following the date of submission of the

report in which the Contractor advises the Minister of its opinion that the

Discovery is commercially viable, the latter shall notify in writing his

approval to the Contractor, and the date of approval by the Minister is the

"Date of Commercial Discovery". At the time of notification of said approval

the Minister grants to the Contractor the Exploitation Permit required for the

exploitation of said discovery. If at the end of this thirty (30) day period,

the Minister has not notified said approval in writing, the Date of Commercial

Discovery shall be the day following the expiration of the thirty (30) days

mentioned above. The Minister shall then grant as quickly as possible the



exploitation



permit



to



the



Contractor



if



it



requests



it.



9.6

If the Contractor deems that the Discovery is not commercially

viable, it must advise the Minister of the reasons on which it has based its

decision. If the Minister questions the basis of the technical or financial

analysis of the Contractor leading to its evaluation of the non commercial

nature of the Discovery, or if for any other reason he deems that the Discovery

could be developed economically by the Contractor in accordance with the clauses

and provisions of the Contract, the Minister must then, within sixty (60) days

if he so wishes, submit the matter of the commercial viability to an Expert in

accordance with the Contract. If the Expert confirms that the Discovery is

commercial, the Contractor may, within thirty (30) days following the date of

receipt of the Expert's decision, either declare that the Discovery is a

commercial Discovery in accordance with the provisions of the Contract and the

date of that declaration shall become the Date of Commercial Discovery, or waive

its rights concerning the Discovery. In this case, the Minister shall have the

right to develop the area of the Discovery and to produce Hydrocarbons in

accordance with the provisions relating to sole risk operations. The Contract

shall remain in effect on the remaining part of the Contract Area.

9.7

Within ninety (90) days following the Date of Commercial Discovery,

the Contractor must submit to the Minister a General Development Program

indicating:

(a)



the proposed Development Area;



(b)



the Development Operations to be carried out, including any additional

delineation of the Development Area and the method of development of

the Associated Gas, if any;



(c)



the Contractor's plans concerning the drilling and completion of the

wells, the production, storage, transportation and delivery facilities

required for the production of Hydrocarbons. The plans must contain

the following information:

(i)



the expected number of Development Wells and their locations;



(ii) the details relating

storage facilities;



to the



production



equipment



and to the



(iii) the delivery points of Crude Oil and Natural Gas; and

(iv) the details of any other

Hydrocarbon Operations.



technical



equipment



required



for the



-25

(d)



the estimated forecasts of Crude Oil and Natural

volumes from the Oil or Gas Fields, and the estimated

of said deposits;



Gas production

commercial life



(e)



the cost estimates of the equipment and current expenses;



(f)



the economic feasibility studies prepared by the Contractor and the

other methods, if any, devised for the development of the Discovery

taking into account:

(i)



its location;



(ii) any pertinent meteorological condition;

(iii) expected investment costs and current expenses; and

(iv) any other information required for its evaluation.



(g)



the safety

measures to be adopted during the Development

Production Operations, including the emergency measures;



and



(h)



the measures to be adopted for the protection of the environment;



(i)



the unforeseeable events that may affect the Contractor's capability

during the implementation of the General Development Program.



9.8

The General Development Program proposed by the Contractor must be

prepared according to the sound geological, engineering and financial principles

and according to the Good Operating Practices of the Oil Industry. Furthermore,

it must be conceived with a view to ensure the optimum recovery of Hydrocarbons

in the Development Area and to prevent their waste.

9.9

The General Development Program of the Contractor may be reviewed

by the Minister who shall give his approval if he deems that it has been

prepared according to the above provisions. If the Minister deems that the

General Development Program submitted by the Contractor has not been prepared

according to these provisions, he shall suggest that revisions be made and the

Contractor may amend same in reply. If within ninety (90) days following the

date of submission of the Program, the Minister and the Contractor cannot agree

on said Program, the matter or matters which are the subject of a disagreement

must be submitted to an Expert who shall settle same. In the event of

disagreement and submission to an expert, the exploitation period of 25 years

shall not include the period of arbitration (including procedural period)

-26

9.10

During the course of the Development and Production Operations,

the Contractor may suggest additions or revisions to the General Development

Program. It shall then submit them to the Minister for review and approval,

using the procedures of article 9.9. If within the ninety (90) days that follow

the submission date of the additions and modifications the Minister and the

Contractor do not agree on said additions and modifications, the matter or

matters which are the subject of disagreement must be submitted mutadis mutandis

to an expert according to the procedure specified in article 9.9 and the

exploitation period of twenty-five (25) years will not include the length of

this procedure.

9.11

If the Contractor wishes to finance the Development Operations

with funds obtained from banks or other sources of financing, the Minister must

assist the Contractor by providing all the information that the banks or sources

of financing may reasonably request, provided that the Minister does not have to

assume any additional obligation of any type, whether financial or otherwise.

-27

ARTICLE X

SOLE



RISK OPERATIONS



10.1

If during the exploration period, the Minister wishes to test

additional reservoirs at the final depth agreed upon, or deepen the well and

test deeper reservoirs than this final depth, the Government shall have the

right, subject to the provisions of Article 10.4, to request the Contractor, by

notification, to test certain additional reservoirs or to continue the drilling

and test new reservoirs, at the sole risk of the Government and on behalf of the

Government, until the Government's objectives have been reached as long as the

request of the Government does not delay, hinder or interfere with the

exploration and evaluation activities of the Contractor. The Government shall

notify the Contractor as soon as possible before or during the drilling but

under no circumstances after the Contractor has started the well completion or



abandonment



activities.



10.2

If during the exploration period, the Parties cannot agree on the

Government recommendation for the drilling of additional exploration wells, the

Minister shall have the right after the initial period to request the Contractor

to drill in the Contract Area at the exclusive risk and expense of the

Government one (1) exploration well provided that this Operation does not delay,

hinder and disturb the exploration and evaluation activities of the Contractor.

In this case, the Minister shall have a maximum period of six (6) months in

which to provide the Contractor with a drilling plan indicating the drilling

details as well as the financing plan of said operation which will be

pre-financed.

10.3

If the operations described under Articles 9.3, 10.1 or 10.2 lead

to a Discovery or to a Commercial Discovery, the Government shall have the

right, at its exclusive expense, risk and benefit, to evaluate said Discovery

and/or to develop and produce the Oil from the reservoir corresponding to this

Discovery. The Contractor shall notify the Minister in writing, before the

beginning of the commercial production of the oil reservoir discovered within

the framework of said sole risk operations, if it wishes to be responsible for

the future development and/or production operations of said oil-bearing

reservoir according to the terms of the present Contract. In this case, the

Contractor shall pay in cash or in kind to the Minister, in addition to one

hundred percent (100%) of the exploration costs and the exploration stand by

costs, if any, incurred by the Minister with regard to the sole risk operations

and connected to the discovered oil-bearing reservoir, an additional amount

equal to three hundred percent (300%) of said exploration and stand by costs.

10.4

shall



The



conditions



for



the



completion



of the sole risk operations



be:

(a)



The production tests of additional formations or the penetration and

the production tests of deeper

formations or the drilling of

additional exploration wells must be technically feasible, and must

not delay, hinder or interfere with the Contractors exploration and

evaluation activities;

-28-





(b)



The deepening of a well under the sole risk operations may not take

place if the well has already penetrated one or several producing

reservoirs;



(c)



No sole risk exploration well may be drilled in an exploitation

or on the site of a Commercial Discovery.



(d)



The Minister may hire a third party for the performance of the sole

risk operations mentioned above. However, the Minister cannot hire a

third party for this purpose without having first offered to the

Contractor a preemption right for the completion on his behalf of said

sole risk operations under identical conditions to those acceptable by

the third party. If the Contractor does not accept to perform these

operations within sixty (60) days from the receipt of the Minister's

notice, the latter shall then be at liberty to hire the third party as

long as this party respects the clause of confidentiality towards the

reports, data and information held or prepared by the Contractor and

received by this third party as per the present article or according

to article IX and in accordance with article XXII.

-29-





ARTICLE XI



area



ANNUAL DEVELOPMENT AND

PRODUCTION PROGRAMS

11.1

The Contractor shall be required to carry the Production and

Development Operations in all the Development Areas in accordance with the

General Development Programs and according to Good Operating Practices of the

Oil Industry.

11.2

The Work Program submitted for the Calendar Year during which a

Commercial Discovery occurs, must be modified by the Contractor within sixty

(60) days following the date of approval of the General Development Program in

order to comply with the latter.

11.3

The Work Programs and the budgets corresponding to the Development

Operations and Production Operations must have as objective the efficient and

economical exploitation of all the Development Areas according to the Good

Operating Practices of the Oil Industry. The Minister shall approve the Work

Programs and the budgets prepared and submitted in accordance with the

provisions of the present Contract.

Within thirty (30) days following the date of receipt of a Work Program and

a budget, the Minister shall approve them as proposed or shall suggest that

amendments be made; if no approval notice or suggestion of amendments has been

received within this thirty (30) days period, the Work Program and the budget

shall be deemed to be approved.

11.4

If the Minister wishes to amend the Work Program or the

corresponding budget, he must inform the Contractor in writing no later than

fifteen (15) days following the receipt of the documents mentioned above. The

Parties shall consult each other and attempt to reach an agreement on the

amendments suggested. If the Minister and the Contractor cannot agree on the

amendments suggested no later than two (2) months after the date of receipt of

the Work Program and the corresponding budget, an Expert shall be called to

settle the matter in accordance with the provisions relating to arbitration and

expert evaluation. The twenty-five (25) year exploitation period, or eventually

the additional period of ten (10) years shall not include the time spent

referring the matter to the expert (including the time of the procedure ).

11.5

The Contractor may, with the Minister's approval, revise the Work

Program and the budget during the Calendar Year in question in order to be able

to take into account newly acquired information, a revised evaluation of the

prevailing conditions, or any other valid reason.

-30

ARTICLE XII

GOVERNMENT PARTICIPATION

12.1

The Government shall have the option to acquire a maximum

participation of fifteen (15)% of the rights and obligations of the Contractor

relating to a discovery when the combined daily production of all the

discoveries of the Contract Area reach for the first time a level of 50,000

barrels during at least six (6) consecutive months.

12.2

The Government must exercise its option of participation by

written notification to the Contractor within thirty (30) days following the

last day of the 6th month of the production level of 50,000 barrels/day. In the

absence of a written notice during this period of thirty (30) days, the option

shall be deemed refused.

12.3

If the Government exercises its option of participation in

accordance with Article 12.1, the Contractor shall assign to the Government the

share requested. To that end, the Contractor shall propose a draft agreement



for



the



Minister's



evaluation.



12.4

The Government Participation shall take effect from the date of

receipt by the Contractor of the written notification mentioned in Article 12.2.

The Government shall from then on pay its share of the Petroleum Costs, in

proportion to its participation, when said costs have been incurred by the

Contractor.

12.5

If the Government exercises its option of participation, it will

reimburse to the Contractor in proportion to said participation, its share of

the Petroleum Costs incurred by the Contractor with respect to the Contract Area

before the date on which its decision to participate has been notified to the

Contractor who shall assist at no cost in the search for necessary funds.

Said share of Petroleum Costs that is reimbursable to the Contractor shall

bear an interest from the date on which the Petroleum Costs have been incurred

until the actual date of participation by the Government, at the interest rate

of the Contract fixed the day before the settlement date.

12.6

of the



The reimbursement mentioned in Article 12.5 shall be at the option

Minister and notified to the Contractor,



-



either in cash by payment in Dollars

by mutual agreement,



within a period to be determined



-



or in kind through lifting by the Contractor of a portion of the

Hydrocarbon share stipulated in Article 13, to which the Government is

entitled, up to fifty percent (50%) of said share. The value of this

portion being calculated in accordance with the provisions of Article

16, and this share shall be equal in value to the amount due on the

date of notification mentioned in Article 12.2, plus the interests

related thereto calculated according to Article 12.5.



-31

12.7

If during the three (3) months following the due date for

reimbursement agreed to between the Parties, the Government does not pay to the

Contractor its share of the Petroleum Costs as stipulated in Article 12.5, the

Contractor shall have the right to retain fifty percent (50%) of the share of

Profit-Oil of the Government until total recovery of said costs.

12.8

If the Government exercises its option of participation, the

Minister shall establish as soon as possible with the Contractor, an operating

agreement in accordance with the international Petroleum Operations which shall

govern the rights and obligations of the Parties.

-32

ARTICLE XIII

COST RECOVERY AND

PRODUCTION SHARING

13.1

Subject to the provisions relating to participation, the

Contractor shall assume and pay all the Petroleum Costs incurred during the

execution of the Petroleum Operations, and it shall recover said costs according

to the procedures defined in Accounting Appendix D.

The costs directly attributable to the development and production of

Non-Associated Gas shall be subject to a specific agreement in accordance with

the provisions of the present Contract.

13.2



The



Petroleum



Costs,



within



the



limits



authorized



by



the



provisions of Appendix "D", shall be recovered from up to seventy-five percent

(75%) of the Available Crude, on a yearly basis for oil and eighty percent (80%)

for condensate. The cost recovery shall occur as follows:

(a)



The recovery of the operating costs shall be made entirely during the

Year when such costs have been incurred;



(b)



The recovery of the exploration costs shall be made from the start-up

Year of the first commercial production deriving from the Contract

Area;



(c)



The development investments shall be amortized

from the start-up Year of the first production;



(d)



The investments related to the exploitation phase shall be amortized

over five (5) Years from the date of their realization;



(e)



Investments shall be recovered

fifteen percent (15%);



(f)



However when total production will have reached its Economic Limit

such as defined in Article 13.7 hereinunder, the Parties shall consult

to take a decision by consensus. This meeting will take place within

thirty (30) days from the date at which the written notification by

the Contractor was received by the Minister.



including



an



over five (5) years



increased



markup



of



13.3

Inasmuch as the Petroleum Costs recoverable during a given Year

exceed the value of the Crude for Cost Recovery ("Cost-Oil") available this

Year, the recovery of the surplus shall be carried forward to the following

Years.

13.4

The Contractor shall deduct on behalf of the Government from the

total production of the Crude extracted from the discovery area, after deduction

of the losses and uses related to the Petroleum Operations, a portion equivalent

to the amount of the tax on oil production equal to 12.5% (twelve and a half

percent) for oil and 10% (ten percent) for condensate. The remaining quantity

of the crude shall be referred to as "Available Crude".

-33

13.5

The remainder of the Available Crude every year after deduction of

the recoverable Petroleum Costs, hereinafter called "Profit-Oil", shall be

shared between the Government and the Contractor, whether the Government shall

exercise or not its option of participation to the rights and obligations in

accordance with Article XII, according to the following progressive scale:

A)



OIL



AVERAGE DAILY PRODUCTION

- -------------------------(BARRELS/DAY)

------------0 to 100,000

Over 100,000

B)



50%

55%



CONTRACTOR SHARE

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



50%

45%



CONDENSATE



AVERAGE DAILY PRODUCTION

- -------------------------(BARRELS/DAY)

------------0



GOVERNMENT SHARE

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



to



100,000



GOVERNMENT SHARE

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



45%



CONTRACTOR SHARE

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



55%



Over



100,000



50%



50%



13.6

The parties agree that if the Economic Limit of a petroleum

reservoir will be reached (ie. if the petroleum costs incurred by the Contractor

exceed the cashflow resulting from the sale of the production in a way that

would cause production from the reservoir to stop prematurely), the parties will

discuss the details needed to make the appropriate changes to the Contract, more

specifically the recuperation of costs and the sharing of production in order to

prolong the life of the field.

-34

ARTICLE XIV

REQUIREMENTS OF

DOMESTIC CONSUMPTION

14.1

Three (3) years after the start up of the Production Operations,

the Government shall have the right to purchase and the Contractor shall be

under the obligation to sell, at a specified Delivery Point, a quantity of

Hydrocarbons either Crude or refined products, or gas equivalent as agreed

between parties, equivalent at most to fifty percent (50%) of the share of

Profit-Oil to which the Contractor is entitled in order to meet the domestic

consumption of Benin. The assignment of Crude Oil shall be made within this

framework in accordance with the provisions of Article 16.2.

If within a period not exceeding sixty (60) days from the date of delivery

of hydrocarbons, the Government has not paid his invoice, the Contractor may

obtain payment by lifting from the Government Profit-Oil share.

14.2

With regard to Crude Oil, the Contractor's obligation to sell

rests on the principle according to which all producers of Crude Oil or exporter

from Benin, including the Government, bring part of their production, at any

moment and in a proportional manner, to meet the requirements of domestic

consumption. In order to take advantage of its acquisition right, the Minister

must give a three (3) months written notice to the Contractor, indicating the

quantity of Crude Oil from the Contractor's remuneration that shall be acquired

during the three (3) calendar months following the above mentioned notice. The

monthly variation of this quantity cannot exceed a range of more or less ten

percent (10%).

14.3

If due to a case of Force Majeure, other contractors or the

Government cannot proportionally contribute to the requirements of the domestic

market, and that, consequently, the volume of participation of the Contractor

and of other contractors to domestic market sales must be increased, the

Contractor must sell the additional quantities required in accordance with the

above Articles and conditions until the Force Majeure has been resolved and

until the contribution intended to proportionally cover the requirement of the

domestic market has been reestablished. This additional obligation does not

include the volumes of production which have been the subject of an export

contract for which the loading period has been fixed within forty (40) working

days following the date on which the Contractor has received notification from

the Minister as to the case of Force Majeure.

14.4

With regard to Natural Gas, the Contractor's obligation to sell

must be established taking into account the criteria used to meet the

requirement of the domestic market stipulated hereinabove, and taking into

account the price of Natural Gas determined in accordance with the present

Contract.

-35

14.5



All



payments



made



regarding



the



sale



of



the



Contractor's



Hydrocarbon to the Government in accordance with the provisions of this Article

must be denominated in dollars and made by bank transfer to the bank account

designated by the Contractor outside Benin, within a period of thirty (30) days

from the date of delivery to the Delivery Point of the Hydrocarbons acquired by

the Government.

-36

ARTICLE XV

TAX SYSTEM

15.1

For the duration of the Contract and in accordance with the

legislation in force in the Republic of Benin, the Contractor shall be subject

to the tax system currently applied to companies in general, and to oil

activities in particular.

15.2

The Contractor shall be required to pay, under the conditions and

the due dates established by the Beninese tax legislation, all the taxes and

duties to which it is subject, in particular Income Tax equal to 55% (fifty-five

percent) of the taxable profit and the Export Tax at the rate of three point

twelve percent (3.12%) of the FOB value.

15.3

It is understood that in application of Article 15.2, the Minister

shall take from the Profit-Oil share to which the Government is entitled under

Article 13.5 an amount corresponding to the Income Tax and the Export Tax

mentioned in the Petroleum Code. It shall pay said tax to the institution

designated for this purpose on behalf of the Contractor and shall have delivered

to the Contractor the related receipts. The same applies for the Export Tax.

In this case, the Profit Oil share to which the Contractor is entitled under

Article 13.5 shall be considered free of tax. In other words, the Contractor is

free of all fiscal obligations, which are by definition, included in the Profit

Oil share of the Government as well as the Royalty on Petroleum Production also

collected by the Government.

15.4

The Contractor and its subcontractors shall be exempt from the

duties and taxes on the equipment, exploitation material and machines imported

by the Contractor and its subcontractors within the framework of the Petroleum

Operations. These goods and equipment may be re-exported at the end of their

use according to the temporary admission system.

15.5



The



Contractor



and



its



subcontractors



shall



be



strictly



also exempt:



(a)



from the Value Added Tax (VAT) on the activities

the Petroleum Operations;



related to



(b)



from the Franchise Tax for a period of five (5) financial years;



(c)



from the surface royalties mentioned in the Code; and



(d)



for expatriate personnel, from contributions to the Social Security

Department of Benin (OBSS), from the employer's contribution (V.P),

and from the apprenticeship tax.



-37

15.6

The expatriate personnel employed by the Contractor and its

subcontractors may import free of duties and taxes with the exception of the

road tax, their personal effects which shall be used during the first six (6)

months of their move. They may also import one vehicle per household as

temporary import.

15.7



The



Government



shall



agree



to



take



into



consideration



any



modification to the fiscal conditions which the Contractor may request at any

time, provided that:

(a)



Such modification does not negatively affect the overall economic

benefits and other advantages that the Government will derive from the

Petroleum Operations; and



(b)



The only reason for proposing such modification shall be either to

permit any person forming the Contractor or any other Affiliated

Company to obtain in another country a tax credit relating to the

taxes paid in the Republic of Benin.



15.8

The Contractor shall be required to pay to the State the income

from the taxes and duties mentioned in the present Contract through a national

structure. The designation of the national structure in question shall occur

within one hundred and eighty (180) days following the Effective Date.

15.9

Government



Within thirty

shall issue, a



(30) days following the date of payment, the

receipt in the Contractor's name for said payment.

-38-





ARTICLE XVI

MEASUREMENT, DISPOSAL, EVALUATION

AND SALE OF HYDROCARBONS

16.1

The Contractor must measure all the Crude Oil and Natural Gas

produced in the Contract Area according to the Good Operating Practices of the

Oil Industry. The Contractor must keep full and accurate records of all the

measurements of Hydrocarbons produced in the Contract Area after extraction of

the water and of its foreign substances, and of all the Hydrocarbons that may be

marketed, which will allow by difference to determine the quantities that have

been used for the Operations and the unavoidable losses. The Minister's

representatives must have access to these records and measures.

The Minister shall have the right to examine and to test all the measures,

measuring equipment, graphics and any other measuring or testing equipment and

information.

If, at the end of an examination or test, it appears that measuring

equipment are not in working order, that they are damaged or badly adjusted, the

Contractor must put them in good working order or shall proceed with the

required adjustments immediately at its own cost.

If, within a reasonable period not exceeding thirty (30) days, the

Contractor does not assume this obligation, the Minister may take the necessary

measures so that said equipment be made operational or have the equipment

adjusted and may invoice to the Contractor the cost of this operation at the

interest rate of the Contract + 1%. If according to the Minister, the error

caused by the bad adjustment, or any other failure of a measuring equipment,

appears to be at the origin of a considerable difference in the production

measurement, the Parties shall consult each other for the purpose of examining

the appropriate measures to be taken. In the event of disagreement, the matter

may be submitted to an expert so that the latter can determine if a retroactive

adjustment of the production figures should be made. If the Contractor deems it

necessary to replace measuring devices or instruments, it must notify the

Minister for approval and give to the Minister's representatives the opportunity

to be present during the operation and to participate.

16.2

Under the present Contract, the price of Crude Oil for each

quarter shall be the weighted average of the FOB prices received by the

Contractor for sales to independent third parties during the corresponding

quarter.



If during a given quarter the Contractor does not sell at least forty

percent (40%) of the total production of Crude Oil of the Contract Area to third

parties which are not related to the Parties, the price of Crude Oil for that

quarter shall be the weighted average of the FOB prices established by

comparison with the Crude Oil Price on the international market taking into

account the quality, density and transportation differentials.

-39

In the absence of an agreement between the Parties within fifteen (15) days

following the end of the Quarter concerned, pending the opinion of an expert,

the sale price agreed to for the Quarter preceding the Quarter in question shall

apply temporarily subject to the retroactive adjustments which would be required

after expert evaluation. The expert evaluation mentioned in this Article shall

occur within a period not exceeding thirty (30) days after the end of the

Quarter concerned.

16.3

Within the framework of the present Contract, the price of Natural

Gas sold on the domestic market of Benin shall be the price received by the

Contractor for sales to third parties. Taking into account the fact that the

gas market is not well developed in Benin, the Minister must assist the

Contractor inasmuch as possible to find possible consumers for the Gas and to

negotiate reasonable sale prices. The Natural Gas price applicable to the Gas

sold to a public Beninese company or to a body whose capital with voting right

is the direct or indirect property of the State, is established by mutual

agreement between the Parties, it being understood that this price must reflect

the commercial value of the energy source that the Gas sold is deemed to

replace, according to the modern technology generally used and taking into

account the cost of the gas produced. The price that applies to the Natural Gas

exports shall be the price received by the Contractor for sales to third

parties, subject to the same conditions normally governing the sale of Crude.

16.4

The Contractor shall have the right to freely dispose of, load,

transport and export the Hydrocarbons to which it is entitled under the

Contract. The Minister may request the Contractor to sell all or part of the oil

to which the State is entitled in accordance with Article 13 and under the

market conditions stipulated in Article 16.2, and provided that the Parties have

agreed on the provisions concerning marketing.

16.5

No later than sixty (60) days before the Start up Date of the

Commercial Production in each Development Area, and thereafter at the beginning

of each Quarter, the Contractor must prepare and provide to the Minister a

forecast indicating the total quantity of Hydrocarbons which, according to the

Contractor, shall be produced during the following four (4) Quarters in the

corresponding Development Area, starting from a production rate mutually agreed

upon to optimize the recovery of Hydrocarbons in the Development Area according

to the Good Operating Practices of the Oil Industry. Each Quarter, the

Contractor shall make reasonable efforts to produce the quantity of Hydrocarbons

which it estimated . The Contractor shall be authorized to use, free of charge,

the quantities of Hydrocarbons produced in the Contract Area, in their natural

or processed state, required for the carrying out of the Petroleum Operations

(including the Operations of Gas loading) according to the Good Operating

Practices of the Oil Industry. Whatever the quantity of hydrocarbons used for

this purpose, it shall not be considered as being part of the Commercial

Production.

-40

ARTICLE XVII

NATURAL GAS



17.1

Benin's domestic market shall benefit from a preferential right

for the acquisition of the Natural Gas produced in any Development Area and

which is not required for the Petroleum Operations in accordance with this

Article, provided that the commercial proposals made are not less favorable than

those under which the gas in question could be exported. The Natural Gas not

sold on the domestic market may be exported.

In the event of discovery of a commercial accumulation of gas, a gas

purchase contract ("Take or Pay" contract) shall be discussed between the

Government and the Contractor as soon as possible. If the direct generation of

electricity would appear more favorable for the two Parties, they shall meet to

determine the conditions thereof.

17.2



ASSOCIATED



NATURAL



GAS



17.2.1

If a Crude Oil Discovery occurs that the Contractor considers to

be commercially viable under the present Contract and this discovery contains

Associated Gas, the Contractor must indicate in its evaluation report if it

anticipates that the estimated production of Associated Gas shall exceed the

quantities of Associated Gas required for the Crude Oil Production Operations

(this surplus shall be referred to hereinafter as "surplus Associated Gas") and

if the surplus Associated Gas can be produced in commercial quantities. If the

Contractor declares that this Associated Gas exists and that it can be produced

in commercial quantities, it shall indicate in the General Development Program

prepared for the Hydrocarbon Discovery the details relating to the gathering,

processing, compression and transportation facilities required to commercially

produce the surplus Associated Gas for commercial purposes, as well as the

corresponding costs.

17.2.2

Within ninety (90) days following the date of submission of the

General Development Program, the Minister may advise the Contractor that he

himself or any other public entity in Benin designated by him, wishes to dispose

of the surplus Associated Gas on the domestic market.

17.2.3

If, in accordance with this Article, the Minister advises that

he wishes to dispose of the surplus Associated Gas on the domestic market, the

Contractor may, by notice within ninety (90) days following the date of

notification of the Minister, participate in the costs of the facilities

required for the production of the surplus Associated Gas and the proceeds

deriving from the sale of said Gas.

17.2.4

If

above provisions:



the Contractor decides to participate in accordance with the



-41

(a)

It shall build gathering, processing, compression, transportation and

storage facilities required for the production and the delivery to the Delivery

Point of the surplus Associated Gas in accordance with the specifications of the

General Development Program.

(b)

The price of the Associated Natural Gas is the price of Natural Gas

determined in accordance with the present Contract.

17.2.5

If the Contractor decides not to participate, it shall then

deliver to the Minister, or to the public Beninese company designated by the

Minister for this purpose, to a Delivery Point designated as "Exit door", and at

its expense, all the quantities of surplus Associated Gas produced, the costs

associated will be considered to be recoverable Petroleum Costs.

17.2.6

environment,

been used.



Subject to the provisions relating to the protection of the

the Contractor may burn any surplus Associated Gas that has not



17.3



NON-ASSOCIATED



GAS



17.3.1

If a Discovery of Non-Associated Gas occurs in the Contract

Area, the Contractor must submit a report in accordance with the provisions of

the present Contract. If the Contractor deems that the Discovery is worth being

evaluated, it must prepare an evaluation, including a reserve estimate, of the

production potential, the development costs and the production costs as well as

of the economic viability. In that report, the Contractor must also declare

whether the Discovery is commercially viable. If the Contractor deems that the

Discovery of Non-Associated Gas does not warrant being evaluated, the provisions

relating to Crude Oil shall apply mutatis mutandis.

17.3.2

If the Contractor deems that the Discovery can be commercially

viable, the Minister shall assist in the evaluation of the gas requirement on

the domestic market as well as in the transformation and marketing activities

required for its distribution to the final users of said market. Similarly, the

Contractor is at liberty to evaluate the viability of Gas export. During the

calendar year following the date of submission of the detailed evaluation report

of the Contractor, the Parties must meet in order to determine if the sale

points and other pertinent factors justify its development and production for

sale on the domestic market and/or if it is considered that this market is not

big enough and therefore the Gas must be exported.

17.3.3

If the Contractor deems that the development of the Discovery of

the Non-Associated Gas is justified, it must submit to the Minister a General

Development Program for said Discovery and the provisions relating to the

commercial discovery and those relating to the Government participation shall

apply to the development and production of said Gas as if it concerned Crude

Oil. If the Contractor deems that the development of the Discovery of

Non-Associated Gas is not justified, the provisions relating to the Crude Oil

shall then apply mutatis mutandis to the development and production of said Gas.

-42

17.3.4

If it has been determined that the Discovery of Non-Associated

Gas cannot be used on the domestic market while the Contractor considers that

said Discovery of Non-Associated Gas may be commercially viable for export, the

Contractor shall then be free to develop the Gas Field provided that it submits

to the Minister a General Development Program. If the Contractor begins the

Development Operations for export, the Minister shall take the necessary

measures to facilitate the construction of the appropriate facilities. The

provisions relating to the commercial Discovery and to the Government

participation shall apply mutatis mutandis to the development and production of

said Non-Associated Gas as if it concerned Crude Oil. Once the Contractor has

started up the Development Operations for export, the right granted to the

Contractor for exportation under the present Article shall remain in effect

during the entire period of the Contract unless the two Parties change the

procedures by mutual agreement.

17.3.5

Under the present Contract, the price of the Non-Associated Gas

produced by a Gas Field intended to be used in Benin shall correspond to the

price of Natural Gas determined in accordance with the provisions of the present

Contract.

17.3.6

Following the Minister approval, the Contractor shall have the

right to build facilities for the separation of gas for the purpose of producing

liquid gas and condensate with due regards to the safety and environment

protection standards,

-43

ARTICLE XVIII



DAMAGES, ENVIRONMENTAL PROTECTION

AND SAFETY

18.1

The Contractor shall be responsible for all damages and injuries

that may be caused to individuals or to the State as a result of its operations.

The Contractor shall be required to safeguard the Government against any damage

for which it may be responsible as a result of its activities under the Contract

or of any operation or activity deriving therefrom. To that end, the Contractor

must, at any time, release the Government from any responsibility against any

claim and obligation resulting from deaths, accidents or damages caused by its

activities, including those carried out under the Contract, or non-compliance by

the Contractor of the laws and regulations in force in Benin. The present

Contract shall not have any effect on claims by third parties against the

Contractor under the laws in force in Benin.

18.2

The Parties acknowledge that, due to their nature, the Petroleum

Operations may produce an ecological imbalance in the Contract Area as a result

of environmental pollution. Consequently, during the performance of the

Contract, the Contractor must adopt the necessary measures in order to prevent

or to reduce to a minimum the pollution of the ground, atmosphere and water, and

ensure that this pollution does not harm the plants and the wildlife and, in

general, prevent everything that could materially harm the environment. If the

Contractor cannot prevent the pollution of the environment, it must take the

necessary measures to reduce to a minimum its effects according to international

standards. These measures must be notified to the Minister for approval.

18.3

Contractor

18.4

damages



In

must



order to reduce to a minimum or eliminate the pollution, the

use adequate technical means, approved by the Minister.



In accordance with the

caused to third parties as



Code, the Contractor is responsible for

a result of environmental pollution.



18.5

The Contractor shall undertake to call on experts in this matter

in order to examine the probable impact of the Petroleum Operations on the

environment. This study must include:

(a)



the condition of the environment and the level of pollution existing

in the Contract Area and in the neighboring areas before the petroleum

operations;



(b)



the impact that the Petroleum Operations may have on the environment.



The



study



1)



a preliminary study delivered by the Contractor to the Minister before

the seismic survey of the Contract Area and



indicated



in



paragraph



(a)



must



be



twofold:



-44

2)



the final study applicable to all the exploration period and which

shall be submitted to the Minister before the drilling of the first

well. The study indicated in paragraph (b) must be carried out and

delivered to the Minister at least ninety (90) days prior to the

drilling of said well.



18.6

The studies listed above must include the procedures used to

eliminate or minimize, among other things, the wastes mentioned below as well

as the way to neutralize them:

(a)



Drilling muds and Hydrocarbons resulting from the tests,

workover and abandonment of the wells;



(b)



Polluted underground reservoirs;



completion,



(c)



Solvents, lubricants and other products used during operations;



(d)



Organic waste,

areas.



detritus and unusable



products from the work and camp



18.7

During the design and building of its facilities the Contractor

must endeavor to minimize the environmental pollution and must at least adopt

the following procedures on the drilling sites and the exploitation equipment

sites:

(a)



Drainage/recovery system of spills of Crude Oil and other derivatives

as well as polluted waters;



(b)



Waste recovery system.



18.8

The Contractor shall undertake to include the provisions of this

Article in all the contracts negotiated with third parties and related to the

Petroleum Operations.

18.9

If the Contractor does not comply with the provisions of this

Article and a spill of Crude Oil or of any other product occurs in the soil,

the sea bottom or in the sea, or if the Contractor's activities cause another

form of pollution or damage springs or the animal or plant life in any other

manner, the Contractor must take immediately all steps according to the Good

Operating Practices of the Oil Industry in order to control the pollution, clean

any spill of Crude Oil or of any other product, or repair as completely as

possible any damage caused.

18.10

If, as a result of the direct effect of a gross or deliberate

negligence on the part of the Contractor, a spill or an act of pollution occurs,

the cost of the control, cleaning and repair operations shall be borne by the

Contractor and shall not be considered Petroleum Costs under the present

Contract.

18.11

In the event of danger which may affect the environment, the

Contractor must immediately notify the Minister and take the measures prescribed

in the emergency procedures adopted by the Parties according to the Good

Operating Practices of the Oil Industry.

-45

18.12

At the end of the Contract, outside the abandonment case, the

Contractor must take measures according to the Good Operating Practices of the

Oil Industry to restore the environment and the sites where the Petroleum

Operations have been performed to their original condition on the Effective Date

of the Contract, taking into account the rules of the abandonment procedure.

At the time of submitting the General Development Program, the Contractor

must submit to the Minister for review and approval a schematic summary of the

environment restoration activities once the Petroleum Operations have been

completed, indicating the manner in which the corresponding costs shall be

financed, preferably through the opening of a special bank account for that

purpose. Each payment by the Contractor to the special account will be

recovered as Cost Oil. Thereafter and at the same time as the Work Program and

the Budgets, such schematic summary shall be submitted to the Minister for

review and approval.

18.13

The Contractor must take the necessary steps according to the

Good Operating Practices of the Oil Industry to carry the activities mentioned

in the Contract in all safety, and must comply with the laws and regulations of

Benin, including the regulations in force with regard to the work, environmental

protection, health and safety. The Contractor must refrain from any action

endangering the health or the safety of persons.



18.14

The Minister shall have the right to inspect all the sites,

buildings and facilities in the Contract Area. In order to have access to these

sites, the Minister must first inform the Contractor in advance.

18.15

The Contractor must supervise the sure and effective treatment of

the water and residual oil and the plugging of the wells before abandoning them.

18.16

the Contract

Appendix.



The Contractor shall clear and remove all platforms installed in

area .according to the abandonment procedures described in the



18.17

The removal, clearing, or abandonment of the facilities set up by

the Contractor shall take place according to the standards of the oil industry

generally accepted in the Gulf of Mexico. On the other hand, the facilities

underwater or others shall be left in such a state so as not to present an

obstacle to navigation.

18.18

oil at



the



18.19

be agreed



The Contractor shall leave all pipelines and facilities free of

expiration of the Contract according to the normal oil practices.

Any change to this agreement with regard to the abandonment must

upon by the two Parties.



18.20

If laws or regulations relating to the environment in force on

the date of signature of the Contract are amended so as to substantially modify

the economic equilibrium of the Contract, the Parties shall refer to the

provisions of Article 29.2.

-46

ARTICLE XIX

PROVISIONS REGARDING EXCHANGE

Under the regulations in force in Benin, the Ministry shall guarantee that for

the duration of the Contract, the Contractor and the non-Beninese subcontractors

shall be authorized to:

(a)



pay in foreign

currency,

in full

reimbursements and other indemnities;



(b)



open, keep and use bank accounts in foreign currency

abroad and accounts in local currency in Benin;



(c)



directly pay abroad, in foreign currency, foreign subcontractors for

the acquisition of equipment and supplies of services related to the

Petroleum Operations;



(d)



receive, transfer and keep abroad and freely dispose of all the funds

including

but not limited to, all payments

received for the

exportation of Hydrocarbons

and any payment received from the

Government;



(e)



obtain from

Operations;



(f)



buy the local currencies required for the Petroleum Operations and

convert in foreign currency all local currencies in excess of the

immediate domestic needs in accredited banks or exchange bureaus;



(g)



transfer abroad all foreign currencies in excess of the local

requirements of the Contractor. The rights given to the Contractor and

subcontractors under this Article shall also apply to expatriate



abroad



all



the



loans



or



in



required



part,



for



the



the



salaries,



in Benin and



Petroleum



employees.

-47

ARTICLE XX

EMPLOYMENT AND TRAINING

20.1



EMPLOYMENT



In compliance with the labor Legislation in Benin, the Contractor shall be

free to hire the personnel and the subcontractors required to perform the

Petroleum Operations in accordance with the Contract.

However, with regard to the recruitment of employees and to the extent

where this is in accordance with an efficient and responsible exploitation of

the Petroleum Operations, the Contractor must give preference to citizens of

Benin qualified, through their training and experience, to perform the duties in

question. With regard to the selection of subcontractors for the performance of

the Petroleum Operations, the Contractor must give preference to Beninese

subcontractors to the extent where the latter are competitive with regard to

quality, costs and technical expertise to maintain the established schedules of

activities.

20.2



TRAINING



The

citizens

validity



Contractor shall undertake to offer adequate training to the Beninese

employed for the Petroleum Operations during the entire period of

of the Contract.



To that end, within three (3) months following the Effective Date, a

training program relating to the Exploration period for a yearly amount of a

minimum of fifty thousand US dollars (US$50,000) shall be established and

submitted by the Contractor to the Minister. Within thirty (30) days following

the start-up of the Commercial Production, the Contractor shall also submit to

the Minister a training program relating to the Exploitation period for a yearly

amount of at least one hundred thousand US dollars (US$100,000).

-48

ARTICLE XXI

ACCOUNTING

21.1

The Contractor must keep its accounting as well as any financial

information, books and records concerning the Petroleum Operations, in national

currency and in the form required by the law in force in Benin.

21.2

those



The accounting procedures to be applied by the Contractor shall be

established in the Accounting Appendix D.



21.3

Minister

Calendar



The audited accounts of the Contractor must be submitted to the

for approval no later than three (3) months after the end of the

Year.



21.4

The Minister may, by notifying the Contractor no later than six

(6) months following the date of submission of the financial accounts, submit

all financial accounts of the Contractor relating to the Calendar Year in

question to the auditing of an International Company of Chartered Accountants,

appointed by agreement between the Parties. The cost of this audit shall be

borne by the Government.



21.5

Unless the Parties find a solution by mutual agreement, the

Minister may submit any objection regarding the Contractor's accounts to an

expert decision. Before giving a decision in connection with the objection

submitted, the expert must take into account the results of the financial audit

made according to the provisions of this Article. If the Minister's objection

is not submitted to an expert within twelve (12) months following the receipt by

him of the accounts, the objection in question shall be null. If the Minister's

objection is validated by the Expert, the Contractor must correct the accounts

in question and bear the costs related to the audit and the expert evaluation

notwithstanding the above provisions.

-49

ARTICLE XXII

CONFIDENTIAL NATURE OF THE DATA

22.1

All the reports, data and information obtained or prepared by the

Contractor, to the extent that they relate to all or part of the Contract Area

shall be the full property of the Beninese State and shall be treated

confidentially. Each Party undertakes not to divulge same except to communicate

them, after the prior approval of the other Party, to:

(a)



An Affiliated company or a subcontractor of the Contractor;



(b)



A financial institution for the purpose of obtaining a loan;



(c)



A stock exchange;



(d)



Any potential assignee in application of Article 23.



This Article shall not prevent the Minister from communicating certain

information to any government entity and to any trustworthy person interested in

securing an exploration and exploitation right of Hydrocarbons in Benin.

22.2

All reports, data and information communicated by the Minister or

the Contractor to a third party in accordance with the above provisions, shall

be made according to agreements the terms of which shall guarantee that these

data, information or reports are treated by the recipient as strictly

confidential.

22.3

The reports, data and information relating the Contract Area and

considered as important by the Minister for the execution by a third party of an

exploration program in a bordering area, shall be communicated to it by the

Minister. In exchange, the Contractor shall have access to the data,

information and reports obtained by said third party concerning a bordering area

of a comparable exploratory potential. The confidentiality provisions shall

apply to this third party.

22.4

All the reports, data and information, including the

interpretations and evaluations relating to any area that no longer forms part

of the Contract Area following relinquishment of a surface area or expiration of

the present Contract, shall be treated by the Contractor as strictly

confidential for a period of five (5) years from the date on which said surface

area ceased to form an integral part of the Contract Area or from the date of

expiration of the present Contract.

22.5

Any failure to comply with the confidentiality Clauses mentioned

in this Article shall be reproved according to the regulations in force in Benin

regarding the divulging of professional secrets.



-50

22.6

Any press publication initiated by the Contractor and relating to

the results of operations conducted under the present Contract shall be subject

to the prior authorization of the Minister.

-51

ARTICLE XXIII

ASSIGNMENT OF RIGHTS

23.1

The Parties may assign all or part of their rights and obligations

deriving from the present Contract. If the Contractor intends to assign or

transfer its rights totally or partially, in accordance with the Contract, it

must immediately submit to the Minister a written authorization request, unless

the transfer is to an Affiliate in which case it must notify the Minister in

writing of its intention to transfer sixty (60) days prior to the Effective

Date, or at a later date agreed to with the Minister, following which the

transfer shall be effective without the need for an authorization from the

Minister. Any request must indicate the name, the address and any appropriate

information on the technical and financial capabilities of the assignee. Within

thirty (30) days following the receipt of the request, the Minister must decide

whether he approves or not the proposed assignment. Any disagreement by the

Minister must be based on reasonable grounds related to the technical and

financial capabilities of the proposed assignee.

23.2

If one of the Parties makes a partial assignment of its rights and

obligations deriving from the present Contract, the assignee shall be

responsible, jointly and severally, for the guarantees, responsibilities and

obligations of the assignor. If the assignment is total, the assignee shall be

solely responsible for said obligations and guarantees. Any assignee must

adhere to the bank guarantees and supply a guarantee from its parent company, if

applicable, as required by the present Contract.

-52

ARTICLE XXIV

FORCE MAJEURE

24.1

The Parties shall not be responsible in the event of failure or

delay in the fulfillment of their obligations resulting from the present

Contract provided this failure or delay is due to a case of Force Majeure.

24.2

A case of Force Majeure shall mean any act or event which does not

fall within the reasonable limits of control of the Parties, and which prevent

them indefinitely or temporarily from fulfilling their obligations under the

Contract. Thus, Force Majeure shall include, but not be limited to the

instances listed below: war or similar situations, embargoes, blockades,

earthquakes, floods, fire, strike or lock-out, terrorism act, riots, government

action.

24.3



The



Party



invoking



the



case



of



Force



Majeure



shall:



a)



Advise the other Party as early as possible by any means and confirm

by registered letter with acknowledgment of receipt describing the

event in detail;



b)



Take as far as possible all appropriate

eliminate the cause of Force Majeure;



and



legal



provisions



to



c)



Inform the other Party in the manner indicated above as soon as the

Force Majeure has been eliminated and resume the execution of its

contractual obligations.



24.4

If the case of Force Majeure lasts for more than three (3) months,

the Parties to the Contract shall meet in order to determine the appropriate

action to be taken.

24.5

It is agreed that if for reasons of Force Majeure, a Party is

unable to fulfill an obligation or to exercise a right under the Contract, the

period granted to fulfill the obligation or to exercise the right, including any

subsequent obligations or rights, shall then be extended by a period equal to

the duration of the Force Majeure.

-53

ARTICLE XXV

ARBITRATION AND EXPERT EVALUATION

25.1



ARBITRATION



25.1.1

Subject to the provisions hereunder relating to expert evaluation,

any dispute or claim related to a matter or operation falling within the

Contract or connected therewith, including, but not limited to, any dispute or

claim relating to its validity, interpretation, execution or omission of

obligations which it claims cannot be amicably settled between the Parties, must

be finally and exclusively settled by arbitration at the initiative of one or

the other Party.

25.1.2

The arbitration procedure shall be implemented by three (3)

arbitrators in accordance with the rules of conciliation and arbitration of the

International Center for the Settlement of Investments Disputes (CIRDI) of the

World Bank Group.

25.1.3

Unless the Parties otherwise mutually agree in writing, the third

arbitrator appointed as indicated above must not be a citizen of Benin or a

person of the same nationality as the Contractor.

25.1.4



For



any



arbitration



procedure



in



accordance



(a)



The procedure must take place in Paris,

otherwise mutually agree;



(b)



The French

and



(c)



The parties

arbitrators.



language



(France),



shall be the official



shall be bound by the



decision



with



this Article:



unless the Parties



language in all respects;

of the



majority of the



25.1.5

If an arbitration procedure has been instituted, the Parties

shall continue to fulfill their obligations under the Contract unless this has

been made impossible due to the case of Force Majeure.

25.1.6

methods



The cost of the arbitration procedure must be borne according to the

defined by the arbitration tribunal.



25.1.7

Under this Article, the Parties shall waive any jurisdictional

immunity. For the execution of the judgments rendered by the arbitration

tribunal of CIRDI, the Parties shall waive the execution immunity with respect

to their property. The seizure and adjudication of property to which this

immunity may give rise includes, with regard to the Government, only those

accounts, income and property related to the Hydrocarbon field in the Contract

Area.



-54

25.2



EXPERT



EVALUATION



25.2.1

Any Party wishing to submit a matter to the decision of an expert in

accordance with a provision of the Contract which provides for this procedure

including the Accounting Appendix, or any other matter that the Parties decide

to submit by joint agreement to the decision of an expert under this Article,

must notify it to the other Party. This notification must include a list of at

least three (3) proposed experts. The other Party must reply to this

notification within thirty (30) days following the date of receipt either by

accepting one (1) of the experts proposed or by proposing at least three (3)

other experts. In the latter case, the Party who has presented the initial

notification shall have thirty (30) days to accept one (1) expert or reject all

the experts proposed by the other Party. Non-notification shall constitute a

rejection of the experts proposed.

25.2.2

If the Parties do not reach an agreement with regard to the selection

of an expert within sixty (60) days following the date of the first notification

under the above paragraph, any of the Parties may request the Center of

technical experts of the International Chamber of Commerce (CCI), whose head

office is in Paris, to appoint an expert in accordance with its rules.

25.2.3

If the expert agreed to by the Parties or appointed in accordance

with the above provisions refuses the Parties' request, dies or, for any other

reason, is unable to act as an expert, the Parties must meet immediately in

order to appoint an replacement expert. If the Parties cannot reach an

agreement within thirty (30) days following the date on which it has been

established that the first expert could not act, any of the Parties may request

the Center of technical experts of the CCI to appoint another expert in

accordance with its rules.

25.2.4

The Parties shall be required to cooperate with the expert inasmuch

as possible and each Party must ensure the cooperation of its Affiliates. The

Parties must ensure access to the data and information which the Parties or

their Affiliates can provide and which, in the expert's opinion, may contribute

to his decision. The Parties' representatives shall have the right to consult

the expert and to provide him with written information but the expert can impose

reasonable limits to this right. He shall be at liberty to assess to what

extent any document and information submitted for his review is duly justified

or pertinent.

25.2.5

shall be



All costs related to the selection and utilization of the expert

jointly and equally paid by the Parties.



25.2.6

Any decision rendered by the expert in accordance with this Article

under a provision of the Contract which expressly provides for this procedure

shall be final and enforceable for the Parties. No Party may submit the matter

which was the subject of an expert decision to an arbitration procedure such as

provided in the present Contract. By joint decision of the Parties, the matters

submitted to the decision of an expert may be subject to a final and definitive

decision through arbitration, if the Parties agree to accept it at the time a

decision was made to submit the matter to an expert.

-55

ARTICLE XXVI

TERMINATION

26.1

In case of non compliance by the Contractor with the provisions of

the present Contract, the Minister may terminate the Contract if the Contractor



does



not



rectify



said



non



compliance.



26.2

If the Minister deems that the Contractor has not complied with

the provisions of the Contract and has thus given rise to a reason for

termination, he must notify the Contractor in writing by formal notice so that

the latter may rectify the situation within sixty (60) days following the

receipt of the notice, if the situation can be rectified. If, within this

period, the Contractor has not rectified the situation, the Minister may declare

the Contract terminated and claim any damages deriving from said failure.

26.3

During the exploitation period, the Contractor may terminate the

Contract, by written notification to the Minister at least sixty (60) days prior

to the date of termination, provided that the Contractor has fulfilled all its

contractual and tax obligations, as well as its obligations related to the

corresponding annual Work Program.

26.4

The Contract shall be automatically terminated by the Minister

through notice to the Contractor when the latter has committed a gross error,

resulting from a deliberate negligence, has issued false declarations in writing

when he should have known that they were false, has assigned any interest

whatsoever to a third party without complying with the provisions relating to

the assignment of rights or when it has been declared bankrupt by a competent

court.

26.5

The Contract may be automatically terminated by the Minister

through written notification to the Contractor in the following cases if within

sixty (60) days following the date of receipt of a notification the Contractor

has not taken the corrective measures:

a)



when the Contractor does not respect the minimum work obligations;



b)



when it does not execute the provisions of an arbitration award or the

decision of an expert.



26.6

If the Contract has been terminated in accordance with this

Article, the Contractor shall have the right to withdraw and export all the

goods used by it, for which the property title has not been transferred, in part

or in full, provided it settles all its debts toward the Government. The

Contractor shall lose any other right under the Contract. It shall not be

released from any of the obligations contracted before the effective date of

termination, whether they are the result of said termination or its object.

-56

26.7

If the Contractor challenges any of the events mentioned in this

Article or maintains that one of these events has occurred but it has rectified

same, the Contractor shall refer the matter to an arbitration procedure or to

decision by an expert within thirty (30) days following the date of receipt of

the termination notice from the Minister. This recourse shall not suspend the

termination.

26.8

Before leaving the Contract Area following termination, the

Contractor must ensure that all wells are left in good condition in accordance

with the Good Operating Practices of the Oil Industry.

26.9

Termination of the Contract shall occur notwithstanding any other

right which may have been established in favor of the Parties, under the

Contract, before said termination.

-57

ARTICLE XXVII

BANK GUARANTEE



27.1

In order to ensure the good performance of the minimum work

obligations provided in the present Contract, the Contractor must submit within

ninety (90) days following the Effective Date, an irrevocable bank guarantee in

accordance with the sample in Appendix C for an amount that is sufficient to

complete the work obligations during the initial phase of the exploration

period. Within forty-five (45) days before the beginning of each extension

phases of the exploration period of the Contract, the Contractor must submit an

irrevocable bank guarantee for an amount that is sufficient to complete the work

obligations for the phase considered.

Non-submission of the bank guarantee within the period required shall

constitute a failure to the provisions of the Contract and shall lead de facto

to its termination by the Minister in accordance with the provisions relating to

termination.

27.2

The amount due in accordance with the bank guarantee mentioned

above shall be progressively reduced as the minimum work obligations for the

year concerned are completed. For the purpose of this reduction, the Contractor

may, at any time, submit for the Minister's approval a declaration establishing

the level of completion of the work obligations. This approval shall take place

within reasonable periods.

27.3

In order to render the above mentioned reduction effective, the

Minister must notify its approval to the bank issuing the bank guarantee within

a period of thirty (30) days from the date of receipt of the Contractor's

request.

27.4

If the Contractor considers that the Minister's approval mentioned

above has been unduly delayed or if the Minister deems that the Contractor has

not satisfactorily executed a minimum work obligation according to the Good

Operating Practices of the Oil Industry, any of the Parties may submit the

matter to the decision of an expert.

27.5

The guarantees to be submitted by the Contractor under this

Article must be approved by the Minister. The Contractor shall forward to the

Minister the original guarantees to enable him to review and keep them.

-58

ARTICLE XXVIII

NOTIFICATION

28.1

In order to

relating to the Contract

registered letter, cable,

addresses:



be considered valid, any letter or notification

must be submitted on a working day or received by

telex or fax to the addressees at the following



THE GOVERNMENT:

represented by

THE MINISTER OF MINES, ENERGY AND HYDRAULICS

04 Postal Box: 1412

Cotonou (Republic of Benin)

Fax (229) 31.35.46 Telex: 5237 MINERH

THE CONTRACTOR

ADDAX PETROLEUM BENIN LIMITED

c/o Addax Management Services

9, rue du Valais

CH 1202 Geneva Switzerland

Fax: 00 41 22 741 50 20

and:



SA



ABACAN RESOURCE (BENIN) LTD.

c/o Abacan Resource Corp.

1750 - 800 5th Avenue SW

Calgary, Alberta T2P 3T6 Canada

Fax: 001 403 269 3944

28.2

The Parties shall have the right to change address for the purpose

of notification and communication by notifying same in writing to the other

Party at least five (5) days before the date of actual change.

-59

ARTICLE XXIX

APPLICABLE LEGISLATION, STABILIZATION

AND COMPENSATION

29.1

accordance



The present Contract shall be governed and interpreted in

with the laws and regulations in force in the Republic of Benin.



29.2

If the laws or regulations of Benin in force on the date of

signature and applicable for the execution or the interpretation of the Contract

or to the economic rights of the Parties are amended so as to substantially

modify the economic equilibrium existing between the Parties on the date of

signature, the latter must meet to discuss any additional agreement which, by

mutual agreement, would reestablish said equilibrium. Any additional agreement

jointly adopted by the Parties must take into account the most probable

technical and commercial parameters in case of future development in the field

of Hydrocarbons. If the parties cannot agree on the parameters to be used for

these calculations, or on the additional agreements which would reestablish the

economic equilibrium existing on the date of signature, the dispute or disputes

must be submitted to the decision of an expert.

If no appropriate rules exist in the Code or in the regulations in force in

Benin, concerning the dispute regarding the contract or related to it, the

customs and practices of the international oil industry and the principles of

law applicable in this regard in the oil countries shall be used.

-60

ARTICLE XXX

INFRASTRUCTURE

30.1

The Government shall facilitate to the Contractor, for the

performance of the Petroleum Operations, the use of any roads, storage tanks and

other structures for storage and processing, piers and other loading and

shipment structures, railway lines, pipelines and other transportation

infrastructures existing in Benin and which are not exclusively used for other

activities including other petroleum activities.

30.2

The Contractor shall pay passage rights and other reasonable fees

for the use of such infrastructures in accordance with the regulations in force

in Benin and article 30.1. The costs incurred within this framework shall be

considered as Petroleum Costs and may be recovered by the Contractor but must

not exceed those paid by the public in general or by other parties in the same

situation as the Contractor.

-61

ARTICLE XXXI

GUARANTEE OF PARENT COMPANIES



31.

The Contractor undertakes to produce on the Effective Date of the

Contract a letter from the parent companies guaranteeing the performance of the

ADDAX PETROLEUM-ABACAN BENIN Consortium with regard to all the obligations

described or mentioned in the Contract.

-62

ARTICLE XXXII

FINAL PROVISIONS

32.1

If on one or several occasions, the Minister or the Contractor

omits to invoke or to emphasize the execution of one of the provisions of the

Contract, the latter must not be interpreted as a renunciation to the future

application of the provision or of the right in question.

32.2

Contract

Republic



All matters which are not expressly provided for in the present

shall be governed by the Code and other laws and regulations of the

of Benin.



32.3

If a provision of the Contract is declared null or invalid for any

reason whatsoever, this does not imply that the Contract or any other of its

provisions may be declared null or invalid, except if the Contract or these

other provisions are affected by this nullity.

32.4

The Contract may not be amended without the unequivocal and

written consent of the Parties, but the Minister may, however, extend the period

during which the Contractor must fulfill any obligation under the present

Contract and each Party, or both Parties together, may freely exercise,

implicitly or explicitly, any rights granted to them hereunder.

32.5

its reading

32.6

versa.

32.7

gender



Any



The

and



reference

Any

vice



and



purpose of the headings used in the Contract is to facilitate

cannot be interpreted as having a special meaning.

to



reference

versa.



the



singular



shall



include



the plural and vice



to the masculine gender shall include the feminine



32.8

The Contract shall constitute the full agreement of the Parties

and shall replace any agreements and results of negotiations conducted between

the Parties before the date of signature.

32.9

published

required.

32.10



Once the Contract has been signed by the Parties, it shall be

in the Official Gazette of the Republic of Benin and anywhere else as

The



present



Contract



has



been



signed



in



two



(2)



originals.



1997

FOR



THE



CONTRACTOR



-63

MADE IN COTONOU, THE 1ST

FOR THE GOVERNMENT OF

THE REPUBLIC OF BENIN



DAY



OF



FEBRUARY,



/s/ Mr. Emmanuael Golou

Minister of Mines, Energy and Hydraulics



/s/ Mr. Marc Lorenceau

President of Addax

Petroleum

Benin Limited



/s/ Mr. Jean Claude Gandur

President of the Addax and

Oryx Group

/s/ Mr. Wade Cherwayko

President of Abacan Resource

Limited (Benin)

-64

APPENDIX "A"

-----------COORDINATE REGION CONTRACT

-------------------------TOTAL AREA OF BLOCK 4: 9953 Km3

1-M)

2-F)

3-O)

4-N)



6

6

5

5



05'

05'

28'

28'



00"

00"

21"

21"



North



1

2

2

1



40'

44'

49'

49'



00"

12"

04"

04"



East



-65

APPENDIX "B"

-----------MAP OF BENIN

-66

APPENDIX "C"

-----------FORM OF BANK GUARANTEE

----------------------67

APPENDIX "D"

-----------ACCOUNTING AND FINANCIAL PROCEDURES

----------------------------------The present Appendix is

exploration and exploitation.



attached



and



is



made part of the Contract of



Dated

_________________________________________

Between

and



THE



THE



GOVERNMENT



SYNDICATE



ADDAX



OF



THE



REPUBLIC



PETROLEUM



-68-



OF



ABACAN



BENIN

BENIN



S.A.





TABLE OF CONTENTS

- ------------------PAGES

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER



1:

2:

3:

4:

5:

6:

7:

8:

9:

10:

11:

12:

13:

14:



General arrangements

Classifications, Distribution of costs and expenditures

Method of recuperation of Contractor's costs

Inventory and evaluation of assets

Report of activities during the Period of exploration

Production Report

Report on the value of the Production

Report on recoverable costs

Statement of expense and receipts

Yearly report

Yearly budget

Forecasts and long term plans

Procedures of accounting and financial revisions

Disagreement with the Contract

-69-





CHAPTER



1:



GENERAL



ARRANGEMENTS



The present Appendix has for a main objective, to establish rules and accounting

procedures allowing the determination of investments, expenses, costs of

exploitation and receipts of the Contractor.

1.1



DEFINITIONS



Terms used

Contract.



in



1.2



REPORTS



the present Appendix have the same meaning as terms used in the

THAT



THE



CONTRACTOR



SHALL



PRESENT:



a)



Within the thirty (30) days that follow the Date of commencement of

the Contract, the Contractor will submit for the Minister's approval

the general lines of one project of accounting procedures, of

operational registries. These procedures should be compliant to norms

in Benin and compatible with those of the International Oil industry.

Within the sixty (60) days following the receipt of the above

documents, the Minister will either have to approve or ask for their

revision. Within ninety (90) days after the Minister's approval, the

Contractor, on the basis of the recommendations that are made will

revise the manuals and the accounting procedures which will be in

force during the length of the Contract.



b)



The reports relating to the Oil Operations that the Contractor should

regularly produce are those that are stipulated in the Contract, In

the present Appendix and those that might make the object of an

agreement subsequently between Parties or that could be required by

the Beninese legislation.



1.3



ACCOUNTING



SYSTEM



The Oil operations accounting system is prepared by the Contractor

according to the terms of the Contract and of the National Accounting Plan. The

whole cost (CCE) method of Capitalization will be used.

1.4



LANGUAGES

a)



AND



UNITS



OF



AMOUNT



TO



BE



USED:



Amounts will be held in the local currency of Benin. Metric units and

Barrels will be measures concerned by the present Appendix. The



language of use will be French.

b)



Rules of accounting and financial procedures are directed so that

neither the Minister nor the Contractor undergo exchange gains or

losses at the expense of either Party. However, if an exchange gain or

a loss is produced, it would be credited or debited to accounts

foreseen by this Contract.



i)



Receipts and expenses in Francs CFA or in American dollars will be

converted on the basis of the average between the exchange rate for

the sale and the exchange rate for the purchase of currencies in

question, as published the last day of the previous month by the

specialized magazines of the BCEAO or of the IMF.

-70-





ii)



If an increase or reduction - isolated or cumulative -, of ten percent

(10%) or more occurs in the exchange rate between the CFA Francs and

American Dollars, during the course of any one month, the exchange

rate to use would be the following:



(1)



For the period from the first day of the month until the day when such

increase or reduction occurs for the first time, the average of the

official exchange rate for the purchase and the sale between the

American Dollar and the CFA franc as published the last day of the

previous month;



(2)



For the period going from the day when this increase or reduction

occurs for the first time until the end of the Month, the mean of the

official exchange rate for the purchase and the sale between the

American Dollar and the CFA Franc published the day when such an

increase or reduction would take -place.



1.5



PAYMENTS

a)



All payments between Parties, except if stated otherwise, will be made

according to the Contract and by the intermediary of a bank that will

be designated by each of the Parties.



b)



All the moneys due by one of the Parties, in virtue of the Contract,

during any one Month, will be subjected at the time of the payment,

for every day of the Month following their deadline, to a daily

compound interest corresponding to the rate of the Contract + 1



CHAPTER



2:



COST



AND



All expenses concerning

distributed as follows:



EXPENDITURES

the



Oil



Operations



will



be



classified,



and



2.1

Costs of exploration including all direct costs and indirect charges for

the oil exploration in the Contract Area, before obtaining the exploration

Permit, notably:

a)



The geophysical studies, geochemical, paleontological, geological,

topographic and seismic studies and their respective interpretations.



b)



The drilling and the coring of Exploration Wells and Appraisal Wells

under the condition that these are not transformed into Development

wells.



c)



The manpower, and the material used for the drilling of Exploration

Wells mentioned below including services there pertaining.



d)



Facilities used exclusively for this goal including access roads.



-71

e)



The service costs

2.4 of the present

the Contractor.



relative to operations as described in the Section

Chapter and agreed upon between the Minister and



f)



The administrative and general expenses relative to Exploration

Operations as described in the Section 2.5 of this Chapter, and agreed

upon between the Minister and the Contractor.



g)



All other contractual costs engaged before the beginning of the

commercial production and that would not have been foreign in Section

2.2.



2.2

Investments for Production development including all expenses during the

Operations of Development and Production, notably:



2.3

the



a)



The drilling of Production Wells from a reservoir already

whether these wells are dry or in production.



discovered,



b)



The completion of wells for the purpose of production.



c)



The

intangible

costs of drilling such as the manpower,

consumables, and the services relative to the drilling and

deepening of wells for the purpose of production.



d)



Costs of development facilities such as pipelines, flexables, units of

production and treatment, wellhead and bottom hole equipment of wells,

systems for improved recovery, drilling platforms, facilities for the

storage of hydrocarbons, terminals and jetties for exportation,

harbors and their

equipments

and access roads for production

activities.



e)



Studies of engineering and design of installations for the field.



f)



The service costs relative to Production Operations, described in

Section 2.4 of this Chapter and as agreed upon between the Minister

and the Contractor.



g)



The administrative and general expenses

described in Section 2.5 of the present

between the Minister and the Contractor.



h)



All other Developmental

commercial production.



the

the



relative to the operations

Chapter and as agreed upon



expenses incurred before the beginning of the



Operating costs including the expenses undertaken for the functioning of

Field, after the beginning of commercial production. These include notably:

Costs



of



Expenses



electric

of



upkeep



energy

and



supplies

repair



of



to



power



the



Wells.



machines, equipments and facilities.



-72

Costs



of



treatment,



Costs



of



the



Cost of

equipment.



transport



production



transportation



-on



and storage of the Raw Oil or of the Gas.

production



control



laboratory.



the ground, by sea and by air of personal and



Costs



related



to



safety,



Costs



of



Well



Costs



of



insurance



to



the



security



and



the



surveillance.



reconditioning.

and



certification



2.4

Costs of services representing the direct, or indirect expenses of

support services to the Oil Operations notably warehouses, jetties, ships,

vehicles, rolling motorized transports, aerial transports, safety stations and

fire stations, shops, water and sewers facilities, electric plants, lodgings,

recreational and communal facilities as well as the furniture, tools and

facilities used for these activities. Costs for one Calendar Year will include

the totality of the costs committed in the said year for the rental, purchase

and/or the building of such facilities as well as the committed yearly costs for

their operation and upkeep. The totality of service costs will be distributed

regularly, as stipulated above.

2.5



Administrative



and



general



expenses



abroad



including:



a)



all administrative and general expenses of the head office and offices

including personnel costs.



b)



expenses of services provided by the head office outside of Benin.



The totality of administrative and general expenses, distributed as

stipulated above, will be defined every month of the Calendar Year by a Oil Cost

percentage accumulated during said Calendar Year according to the following

scale:

of



0



to



10,000,000



of



subsequent



10,000,000



in



of



excess



dollars



dollars



20,000,000



dollars



-



3%



-



2%



-



1%



-73

CHAPTER



3:



METHOD



OF



RECUPERATION



OF



THE



CONTRACTOR



COSTS



By virtue of the arrangements of the Contract, the Contractor shall take to

his account all costs and expenses concerning the Oil Operations. They will be

recoverable by the Contractor according to arrangements following:

3.1

Recoverable costs without approval of the Minister to operations

previously programmed by the Contractor and approved by the Minister according

to arrangements of the Contract.

They include: costs of exploration, costs of development, operating costs,

costs of services and the general administrative expenses described respectively

in sections 2.1; 2.2; 2.3; 2.4 and 2.5 hereinabove.

a)



WITH



REGARD



The costs of the

employed in conducting

taken in consideration

(i)



TO



PERSONNEL



Contractor's employees affected to Benin and directly

Oil Operations of temporary ' or permanent nature are

under the following conditions:



the total cost of salaries and wages.



(ii) the reasonable costs incurred by the Contractor for sickness leave,

disability benefits, living and lodging allowances, travel, bonuses

and other generally applicable benefits to the salaries and wages as

direct costs in the framework of the present Appendix, as well as the

proportional costs relating to the benefits in employee favor such as,



among

others,

life

insurance and

sickness-insurance,

hospitalization, retirement, bonus and other similar benefits.

(iii)expenses or contributions made regarding

organism in favor of said employees.



union,



charges imposed by a public



(iv) expenses for the transportation of employees, of equipment, of

materials and of the necessary elements for the realization of the Oil

Operations.

(v)



costs incurred by the Contractor for the relocation of employees to or

from the Region of the Contract or in its neighborhood, whether they

are affected in a permanent or temporary manner to the Oil operations.



When an employee is affected to other activities, other than that of the

Oil Operations, costs of relocation must be imputed according to solid and

generally accepted accounting principles .

The costs of relocation of employees and their family, the move of the

personal effects and of the domestic articles of employees and their family and

all other expenses according to practices of the oil industry.

-74

Costs of relocation from the Region of the Contract or its neighborhood,

toward another foreign place are not recoverable unless the foreign site is the

usual place of residence of the employees.

b)



WITH



TO



OFFICES,



EQUIPMENTS



AND



VARIOUS



FACILITIES:



i)



Costs caused by the utilization of offices, dependences, camps,

storage depot, lodgings and other facilities of the Contractor in

Benin and serving directly to the Oil Operations. If these facilities

serve to other operations than the Oil Operations, and that it is not

possible to define expenses as direct expenses tied to the Oil

operations for which the service has been given, costs must be imputed

to facilities to which the service has been given, in a systematic and

reasonable manner.



ii)



Costs caused by the acquisition, the rental, the installation, the

exploitation,

the

repair and the

maintenance

of systems of

communications, including the radio and VHF facilities used directly

for operations.



c)



d)



REGARD



WITH



REGARD



TO



PROVISION



OF



SERVICES



i)



Costs and expenses incurred regarding Consultants used for technical

services and those of all other nature directly bound to the Oil

operations

including,

among others,

laboratory analyses,

the

industrial drawings, the geophysical and geological interpretations,

the engineering and the processing of data, obtained from external

sources.



ii)



The costs invoiced for services provided by Affiliated companies must

be competitive with services of the same quality provided by third

parties.

WITH



REGARD



TO



THE



MATERIAL



AND



EQUIPMENTS



OF



THE CONTRACTOR



For the assessment of the material and equipment provided by the Contractor

from its own inventory or one of its Affiliated members, the values -"All," B"

or "C" must be taken in consideration, according to the case, being understood

that any value exceeding the just price of the market in Benin is not

recognized:



-



Material



and



new



Equipments



(Category



"A")



The material and the new equipments are valued at the price of the

corresponding commercial invoice increased by the supplementary costs of import,

if the case arises, and of the other costs generally admitted by accounting

techniques and practices.

Material and used equipments (Category "B" and "C") . Are considered

in the "B" category the material and facilities that are not new but that can be

used without having to be refurbished; this material and these facilities are

valued to seventy-five percent (75%) of the price of the new material and

equipments.

-75

Are considered in the "C" category facilities and the material which can be

used for their initial function after an appropriate refurbishing. These

equipments and materials are valued at fifty percent (50%) of the price of new

equipments and materials.

1-E)



With



regard



to



the



acquisition



of



goods



and



equipments



i)



The cost of acquisition of goods and equipments from third parties

must include expenses of custom agents, of transport, of loading and

unloading and procedures of purchase, export or import duties and

expenses caused by obtaining licenses as well as losses of equipments

and goods in transit if these are not covered by an insurance. The

accumulation of excess stocks must be reduced to the minimum, taking

into account the localization of sources of provisioning and the

necessary time for the delivery of goods and equipments from distant

locations.



ii)



All material bought by the Contractor in the conducting of Oil

Operations will be inspected by the Government diligence before their

use according to the regulations in force.



iii) The Contractor not guaranteeing the material beyond the guarantee of

the supplier or the manufacturer, any sums received by the Contractor

from the suppliers, manufacturers or of their representatives in

compensation for deficient materials or equipments will be written to

the credit of the Contractor under the terms of the Contract and will

be deducted from recoverable costs.

f)



WITH



REGARD



TO



INSURANCE



COSTS



This means costs incurred by the Contractor or by an Affiliated Company to

subscribe to an ins ice policy in the framework of the, Operations and this on a

competitive basis.

g)



WITH



This

employees

h)



REGARD



RECOVERABLE

These

a)



TRAINING



COSTS



means expenses incurred by the Contractor for the training of its

and for all other necessary training according to the Contract.

RENTAL



3.2



TO



COSTS

COSTS



ACCORDING

UNDER



TO



RESERVE



ARTICLE

OF



THE



4



OF



THE



MINISTER'S



CONTRACT

APPROVAL



are:

Research and development costs for new equipment, materials and

techniques intended for exploration, development and the production of

Oil which are not included in the work program approved by the



Minister.

b)



Of costs and expenses not mentioned in the present

are incurred during the Petroleum Operations.



Appendix and that



-76

c)



d)



Of interest charges incurred on loans received by the Contractor for

the financing of the Petroleum Operations. All interest rates conform

to the international financial market and agreed upon by both Parties

are recoverable.

Rents, Charges and other taxes:



Rents, excluding the residences of the Contractor, taxes, contributions, duties,

subscriptions and all other taxes and charges levied by the State concerning the

Petroleum Operations and paid directly or indirectly by the Contractor,

according to the clauses of the Contract.

e)



Of costs and losses incurred as a consequence of events that are not

foreseen by insurance as defined in the Contract, except in the case

where costs and losses would be the exclusive result of a mistake or

an act of gross carelessness by the Contractor or an Affiliated

Company or one of its subcontractors.



f)



Of legal costs and expenses relative to the Petroleum Operations.



3.3



NON



These



RECOVERABLE



COSTS



are:

a)



Fines, supplements and adjustments for delay in the payment of duties

or taxes prevailing in the country or adjustments for incorrect

payment of these taxes provided that such a delay or incorrect payment

is attributable to the Contractor.



b)



Of import duties of goods and equipment not proving necessary to the

Petroleum Operations, and for housing of non necessary personnel.



c)



Of all costs and expenses

Contract.



d)



Of expenses pertaining to interests on credit for receivable.



e)



Expenses made due to non fulfillment of the Contract obligations.



f)



Of expenses pertaining to Petroleum Operations which are badly

executed as a result of a major technical error by the Contractor or

any of its subcontractors.



g)



Of costs and expenses of all banking guarantee tied to the Contract.



h)



Of grants in general.



i)



Of advertisement expenses.



j)



The costs of inventory taking in

transfer according to the Contract.



incurred



before the



starting



case of the



date of the



Contractor



rights



-77

k)



The commercialization

Delivery point.



costs of the Crude or its transport beyond the



l)



The costs of appraisals and arbitrations described in the Contract.



m)



Of the additional sum of 300% tied to Operations in Sole risks.



n)



Of Commissions paid by the Contractor to intermediaries.



o)



Of costs and expenses without accounting receipts.



p)



Of costs and expenses of goods or services exceeding the price of

similar goodsor services in the area of West Africa at the moment of

their acquisition if circumstances didn't justify such costs and

expense surplus.



CHAPTER



4:



INVENTORIES



AND



ASSESSMENT



OF



ASSETS



4.1

The Contractor must hold the licences of real estate possessions and

other assets used in the Petroleum Operations according to the normal accounting

practices of the country and the International Oil industry.

4.2

At reasonable intervals, but at least once per year pertaining to mobile

assets and at least every three (3) years for the case of real estate assets,

the Contractor will make an inventory of the goods concerned by the Contract. At

least thirty (30) days in advance, the Contractor will communicate in writing to

the Minister its intention to make the said inventory; the Minister will be

represented during the realization of this inventory. The Contractor will

clearly express the

principles used for the valuation of stocks.

4.3

time



he



CHAPTER



The Minister can ask the Contractor for information on its assets at any

judges necessary.

5:



REPORT



OF



ACTIVITIES



DURING



THE



EXPLORATION



PERIOD



5.1

During the exploration period, the Contractor will prepare for every

trimester, a report of activities which includes:

the list with a detailed description of activities achieved during the aforesaid

trimester. This report will be based on plans, maps, cross sections and all

other data indicating the level of completion of the work being performed. the

costs relative to the different activities mentioned above.

5.2

The activity report will be submitted to the Minister for approval

within a time limit of thirty (30) days after the end of the trimester

considered.

-78

CHAPTER



6:



PRODUCTION



REPORT



6.1

Once the commercial production begins in the Contract Area, the

Contractor shall prepare for every Trimester a production report for each

exploitation zone which will include the following data;

a)



The quantity of Crude oil produced and stored during the Trimester.



b)



The quantity of Crude Oil used for

Trimester.



c)



The quantity of Crude Available at the end of the Trimester concerned.



d)



Parameters and performances of the reservoir; recordings of the logs

and well tests and their interpretations; analyses of the fluids

produced.



Petroleum



Operations



during the



6.2

The production

Minister for approval

Trimester considered.

CHAPTER



7:



report

within



REPORT



ON



for

the



every Trimester will be submitted to the

thirty (30) days following the end of the



THE



VALUE



OF



THE



PRODUCTION



7.1

The Contractor shall prepare a report on the precise determination of

the market value of the Crude produced and stored after losses relative to the

Petroleum Operations during each Trimester. This report will contain the

following data:

a)



The quantities

of its sales

considered.



b)



Information obtained by the Contractor concerning the prices of Crude

produced by the main producers and exporting countries including

contract prices, discounts and bonuses, as well as the prices received

on the spot markets.



7.2

The report on

Minister for approval

CHAPTER

8.1

the



8:



sold and prices received by the Contractor as a result

of Crude to third parties

during the Trimester



the value of the production, will be presented to the

within the thirty (30) days following the Trimester.



RECOVERABLE



COSTS



REPORT



The Contractor should prepare, for every Quarter, a report concerning

recoverable costs, a report which will contain the following information,:

a)



The recoverable Petroleum Costs, carried over if necessary,

previous Quarter.



b)



The recoverable Petroleum Costs of the Quarter considered.



c)



The total amount of the recoverable Petroleum

considered described in the paragraphs above.



from the



Costs for the Quarter



-79

d)



The quantity and the total value of the Crude Oil

Contractor for the Cost Oil during the Quarter.



calculated



e)



The Petroleum Costs recovered during the Quarter considered .



f)



The cumulative amount of Petroleum

the Quarter considered.



g)



The amount of recoverable

the next Quarter.



Petroleum



Costs



by the



recovered until the end of



Costs which must be reported to



8.2

The report of the recoverable costs for each Quarter will be submitted

to the Minister for approval within thirty (30) days following the end of each

Quarter.

8.3

In spite of the obligation that it has to keep accounts in Francs CFA,

the Contractor will keep a separate account in US Dollars for the determination

of the Cost Oil.

CHAPTER



9:



STATEMENTS



OF



EXPENSES



AND



REVENUES



9.1

The Contractor should prepare for every Quarter, a statement of expenses

and revenues made in the framework of the Contract. This statement will make the

distinction between Exploration Costs, investment expenses, development and

exploitation expenses, and Operating Costs, and it will identify the main



categories



of



expenses



corresponding



to



these.



It



will



show



notably:



a)



Real expenses and revenues for the Quarter considered.



b)



Cumulative

considered.



c)



The latest forecast of cumulative expenses till the end of the year.



d)



Discrepancies

explanation.



expenses



and



revenues



for



the



budget



of



the



year



between the estimated budget and realizations and their



9.2

The statement of expenses and revenues for every Quarter will be

submitted to the Minister for approval within thirty (30) days following the end

of the Quarter considered.

CHAPTER



10:



YEARLY



REPORT



The Contractor should prepare a yearly report that will be the synthesis of

informations relating to the production, to costs recovery of costs, to revenues

and expenses. Said report will be based on the real volumes of Oil produced and

of the incurred expenses. From this report, any necessary adjustment will be

done to payments made to the Parties according to the Contract. The yearly

report for each Civil Year will be submitted to the Minister for approval within

sixty (60) days after the end of said Year.

-80

CHAPTER



11:



YEARLY



BUDGET



11.1

The Contractor shall prepare a yearly Budget that will make the

distinction between Exploration Costs, Development and Exploitation Investment

and Operating Costs to outline the following:

a)



Forecast of expenses and revenues for the budgetary

the Contract.



year according to



b)



Cumulative expenses and revenues to the end of said budgetary Year.



c)



Program

showing the most important

categories of expenses

development and exploitation investment for said budgetary Year.



d)



For a budgetary item and provided that he respects the General program

of the approved tasks, the Contractor is allowed to commit overrun

expenses to the limit of ten percent (10%) of said item and said

expenses must be justified. If this limit is exceeded, the Contractor

will take all necessary arrangements to inform the Minister and to

justify all overrun of expenses within thirty (30) days following its

execution.



of



11.2

The yearly Budget will be presented to the Minister within a time limit

of ninety (90) days before the beginning of the year considered except for the

first Year of the Contract where the aforesaid Budget will be submitted within a

time limit of thirty (30) days after the Date of Commencement of the Contract.

CHAPTER



12:



FORECASTS



AND



LONGTERM



PLANS



The Contractor should prepare and should submit to the Minister the two (2)

following long term plans:

12.1



PROGRAM



OF



EXPLORATION



During phases of Exploration, the Contractor will prepare a Program of

Exploration for every phase starting from the Commencement Date of the Contract,



program



that



will



contain



the



following



information:



a)



Evaluations of Exploration

Years of the program.



Costs



showing



b)



Seismic operation details for each Year.



c)



Details of drilling activities programmed for each Year.



d)



Details of the utilization and

each Year.



requirements



expenses for each of the



for



infrastructure



for



The program of exploration will be reviewed each Year. The Contractor will

prepare and will submit to the Minister, the first program of exploration within

the sixty (60) days following the Commencement Date of the Contract. It will do

thus each Year, within a time limit of forty-five (45) days, before the end of

the Civil Year.

-81

12.2



DEVELOPMENT



FORECASTS



The Contractor shall prepare triennial Development forecasts beginning the

first day of January after the date of the first program of assessment has been

approved by the Minister. The Contractor will prepare and will submit to the

Minister development forecasts reviewed at least forty-five thus (45) days

before each civil Year, as long as required by the Contract or by common

agreement between Parties.

12.3



CHANGES



IN



PROGRAMS



AND



FORECASTS



The Minister and the Contractor agree that details of the Exploration

Program and Forecasts of Development may require changes due to changing

circumstances and results acquired. In this spirit, a revision of said programs

and forecasts may be done annually.

CHAPTER



13:



PROCEDURES



FOR



ACCOUNTING



&



FINANCIAL



REVISIONS



The terms of accounting and financial procedures may be amended by

agreement of both Parties. Amendments will be made in writing and will specify

the date to which they will come into effect.

CHAPTER

of



14



DISAGREEMENT



WITH



THE



CONTRACT



In the case of a difference between terms of the present Appendix and those

the Contract, those of the Contract will prevail.

-82-





Appendix "E"Abandonment Procedure

The following procedure of dismantling of the offshore facilities indicates the

steps to be implemented for the removal of the steel structures in water depths

from 85 to 150 feet ( 26m to 46m).

I.MOBILIZATION

- -------------1.

the

2.

under



Obtain all approvals and authorizations pertaining to the abandonment of

facilities, and dump the structures into a deep water site.

Plug and abandon

the mud line.



each well. Cut the guide tubular of each well 15 feet



3.

with



Evacuate all hydrocarbons out of the tanks and reservoirs, and clean up

water all surface pipes, evacuation flowlines and pipelines.



II. DISMANTLING

- ---------------1.



Unhook



and



remove



2.



Cut



the



3.



Cut



the feet under the mudline and displace the jacket of the structure.



4.



Drive



feet



back



and



the



the



mobile



displace



jacket



to



equipments



the



an



bridge



approved



and

of



the



water



facilities.

structure.



depth.



-83







EX-10.23

28



EXHIBIT



10.23



OIL EXPLORATION AND

EXPLOITATION CONTRACT

OFFSHORE NO. 1 AND SEME BLOCK

BETWEEN

THE GOVERNMENT OF THE REPUBLIC

OF BENIN

AND

ADDAX PETROLEUM -- ABACAN BENIN

CONSORTIUM







TABLE OF CONTENTS

PREAMBLE









I



DEFINITIONS



II



OBJECT OF THE CONTRACT



12



III



VALIDITY PERIOD OF THE CONTRACT



13





5



IV



OWNERSHIP OF ASSETS, DATA AND

HYDROCARBONS



16



V



RELINQUISHMENTS



19



VI



MINIMUM WORK OBLIGATIONS



20



VII



JOINT TECHNICAL COMMITTEE



22



VIII



PERFORMANCE OF THE OPERATIONS, WORK

PROGRAM, BUDGETS, REPORTS



24



DECLARATION OF COMMERCIAL DISCOVERY

AND DESIGNATION OF THE DEVELOPMENT AREA



28



X



SOLE RISK OPERATIONS



32



XI



ANNUAL DEVELOPMENT AND PRODUCTION

PROGRAMS



34



XII



GOVERNMENT PARTICIPATION



35



XIII



COST RECOVERY AND PRODUCTION SHARING



37



XIV



MEETING THE REQUIREMENTS OF DOMESTIC

CONSUMPTION



39



XV



APPLICABLE TAX SYSTEM



41



XVI



MEASURE, DISPOSAL, EVALUATION AND SALE

OF HYDROCARBONS



43



IX



1



XVII



NATURAL GAS



46



XVIII



DAMAGES, ENVIRONMENT PROTECTION AND SAFETY



49



XIX



PROVISIONS REGARDING CHANGE



53



XX



EMPLOYMENT AND TRAINING



54



XXI



ACCOUNTING



55



XXII



CONFIDENTIAL NATURE OF THE DATA



56



XXIII



ASSIGNMENT OF RIGHTS



58



XXIV



FORCE MAJEURE



59



XXV



ARBITRATION AND EXPERT EVALUATION



60



XXVI



TERMINATION



63



XXVII



BANK GUARANTEE



65



XXVIII



NOTIFICATION



66



XXIX



APPLICABLE LEGISLATION,

STABILIZATION AND COMPENSATION



67



INFRASTRUCTURE



68



XXX



XXXI



GUARANTEE OF PARENT COMPANIES



69



XXXII



TRANSITIONAL PERIOD



70



XXXIII



FINAL PROVISIONS



72

2





APPENDICES



APPENDIXA A:



COORDINATES OF THE CONTRACT AREA



APPENDIXA B:



MAP OF THE CONTRACT AREA



APPENDIXA C:



BANK GUARANTEE



APPENDIXA D:



ACCOUNTING ANNEX



APPENDIXA E:





ABANDONMENT PROCEDURE



3



PREAMBLE

WHEREAS:

In accordance with Ordinance No. 73-33 of April 13, 1973, concerning the

Petroleum Code of the Republic of Benin as well as the legislation issued

thereafter, in particular Ordinance No. 73-34 of April 13, 1973, concerning Oil

Taxation and Decree No. 73-130 of April 13, 1973 concerning the application of

the Petroleum Code, the prospecting, exploration, exploitation, holding,

transportation, marketing and trade of Hydrocarbons in the territory and in the

territorial waters of the Republic of Benin and on the continental margin

adjacent thereto, shall be subject to the provisions of said Ordinance which

furthermore stipulates that the liquid and gaseous Hydrocarbon fields belong to

the State and constitute assignable mineral substances.

In accordance with Article 10 of this Code, the State may undertake any

Petroleum Operations either solely, or in association with private capital; it

may also obtain for itself or issue to any department or public company with

legal status, the exploration and exploitation permits, the concessions and

provisional authorizations to exploit.

In accordance with Article 8 of the Code, the State of Benin may also grant

petroleum rights to natural persons or legal entities.

In accordance with Article 17 of the Code, prior to granting a Hydrocarbon

Exploration permit, the Ministry in charge of Mines shall enter into a contract

with persons who have the required technical and financial capabilities to

undertake such activities, defining the rights and obligations of the future

permit holder in both the exploration and the exploitation periods.

Further to the above, the Government of the Republic of Benin has decided to

enter into this Contract with the ADDAX PETROLEUM-ABACAN BENIN Consortium, a

company incorporated and registered under the laws of the Republic of Benin,

with a head office in Cotonou, Republic of Benin, in order to allow the

Hydrocarbon exploration and exploitation in accordance with the articles and

provisions specified in this Contract.

IN



WITNESS



WHEREOF:



The undersigned Parties represented, on the one part, by MR. EMMANUEL GOLOU,

MINISTER OF MINES, ENERGY AND HYDRAULICS and on the other part, by MESSRS. MARC

LORENCEAU, PRESIDENT OF ADDAX PETROLEUM BENIN AND WADE CHERWAYCO, PRESIDENT OF

ABACAN RESOURCE LIMITED (BENIN)

agree



as



follows:

4





ARTICLE 1

DEFINITIONS

The terms below appearing in the Contract shall be defined as follows, unless

otherwise indicated, or unless otherwise mutually agreed upon between the

Parties. The definitions are the same whether they are used in the singular

form or in the plural form.

1.1

"AFFILIATE" or "AFFILIATED COMPANY" means a company or any other entity

controlling one or several entities forming the Contractor, or which is

controlled by one or several entities forming the Contractor, or which is

controlled by an entity which controls the Contractor. The control means the

direct or indirect ownership of more than fifty percent (50%) of the shares

making up the capital of the controlled company, thus granting to the

controlling entity, the majority of the voting rights in the controlled company.

1.2

"CALENDAR YEAR" means a period of twelve (12) consecutive months

beginning on January first and ending on the following December thirty-first.

1.3

the



"CONTRACT YEAR"

Effective Date of



means a period of twelve (12) consecutive months from

the Contract or the anniversary of the signature date.



1.4

"APPENDIX" means an appendix to the Contract and forming an integral

part thereof. If there is a disagreement or a conflict between the Contract and

one of the annexes, the provisions of the Contract shall prevail.

1.5

"ACCOUNTING APPENDIX" means

established in Appendix "D".



the



accounting



procedures



and



methods



1.6

"ARTICLE" means any numbered provision of the Contract, including all

its subdivisions, unless it is expressly indicated that it relates to an article

of the Code.

1.7

"BARREL" means U.S. Barrel, or a quantity or unit of measure of oil

equivalent to 158.9884 litres or 42 American gallons, measured at a temperature

of 15.5556 degrees Celsius or 60 degrees Fahrenheit and at the atmospheric

pressure.

1.8

"AVAILABLE CRUDE" means the remaining quantity of the Total Crude

Production extracted from the Contract Area after deduction of the losses

relating to the Petroleum Operations and of the Oil Production Tax in accordance

with Article 13.4 hereof.

1.9

"COST-OIL"

Petroleum Costs.

1.10

Cost



means



the



volume



of



Crude



reserved



for the recovery of



"PROFIT-OIL" means the remaining Crude each year after deduction of the

Oil.



1.11

"BUDGET"

contained in an



means the financial estimate

Annual Work Program.

5



of



all petroleum activities





1.12

"CODE" means Ordinance No. 73-34 of April 13, 1973, concerning the

Petroleum Code of the Republic of Benin as well as subsequent legislation, in

particular Ordinance No. 73-34 of April 13, 1973, concerning Oil Taxation, and

Decree No. 73-130 of April 13, 1973, concerning the application of the Petroleum

Code.

1.13

"CONTRACTOR"

and/or any assignee

assignment of which



means ADDAX PETROLEUM - ABACAN BENIN and their successors

granted any of their rights under the Contract, the

is in accordance with Article XXIII.



1.14

"CONTRACT" means this document as originally drawn up, duly signed

including its Appendices as well as any additional agreements or any amendments

made by the Parties at a later date.

1.15

"PRODUCTION COSTS" means the costs and expenses incurred as a result of

the carrying out of the Production Operations, excluding the new investments

that have occurred during this phase.

1.16

"PETROLEUM COSTS" means all the costs and expenses related to the

Petroleum Operations specified in the Accounting Appendix and in accordance with

the Contract.

1.17

"EXPLORATION COSTS"

Exploration Operations.



means



the



costs



and



expenses



related



to the



1.18

"DEVELOPMENT COSTS"

Development Operations.



means



the



costs



and



expenses



related



to the



1.19

"START-UP DATE OF COMMERCIAL PRODUCTION" means the date of the first

delivery of Hydrocarbons in commercial quantities to the delivery point in

Benin.

1.20

by the



"EFFECTIVE DATE" means the date on which this Contract has been signed

duly authorized representatives of the two Parties.



1.21

"DISCOVERY" means the evidence of the presence of Hydrocarbons in a

reservoir or geologic structure where such Hydrocarbons had not been previously

identified, resulting from the Petroleum Operations in accordance with the

Contract, and when these Hydrocarbons are recoverable at the surface by

conventional methods used in the international oil industry.

"COMMERCIAL DISCOVERY" means a Discovery of Hydrocarbon reserves following

Exploration Operations, which is deemed commercial in accordance with the

provisions of Article IX.

1.22

"CURRENCY" means any foreign currency freely convertible and generally

accepted by the international banking community.

1.23



"DOLLARS"



1.24



"FCFA"



1.25

"DATA"

geophysical or



means the official currency of the United States of America.



means



the



official



means any document,

petrophysical nature



currency



of



the



Republic



of



Benin.



report and information of a geological,

of the Contract Area.



6



1.26

"EXPATRIATE EMPLOYEE" means an employee of the Contractor or of a

subcontractor who has been recruited as such and assigned to the Petroleum

Operations in Benin.

1.27

"STATE" means the Republic of Benin, its Government, its administrative

structures and any subdivisions and political institutions.



1.28

"EXPLORATION" means the planning, execution and evaluation of any type

of geological, geophysical, geochemical and other studies, as well as the

drilling of Exploration Wells for the purpose of making a Hydrocarbon Discovery.

1.29

as the



"ASSOCIATED

Crude Oil.



GAS"



means the Gas extracted from a well at the same time



1.30

"NATURAL GAS" or "GAS" means the Hydrocarbons in the gaseous state

under normal atmospheric pressure and temperature conditions, including, without

limitation, the combination gas, the dry gas, the wellhead gas and any other

gaseous hydrocarbon, including the residual gas after condensation or extraction

of liquids, but not including said condensates or extracted liquids.

1.31

"NON-ASSOCIATED GAS" means the Natural Gas which is not exploited at

the same time as the Crude Oil or which exists at the same time as the Crude Oil

which cannot be commercially produced when said Natural Gas is commercially

produced.

1.32

"GAS FIELD" means one or several accumulations of Natural Gas

vertically superincumbent in the Contract Area, with a commercial value

established in accordance with the Good Practices of the Oil Industry.

1.33

"OIL FIELD" means an accumulation of Crude Oil, or several

accumulations of Crude Oil vertically superincumbent in the Contract Area and

with a commercial value established in accordance with the Good Practices of the

Oil Industry.

1.34

"GOVERNMENT" means the body regrouping all the State Ministers. In

this Contract, this means the Government of the Republic of Benin, its

representatives or authorized agents.

1.35



"HYDROCARBONS"



means



the



Crude



Oil



and/or



the



Natural



Gas.



1.36

"WORKING DAY" means all working days from Monday to Friday, except for

the days declared in full or in part non-working days in Cotonou, Benin, by the

competent government authorities.

1.37

"MINISTER" means the Minister in charge of Hydrocarbons in the Republic

of Benin.

1.38

"EXPLORATION OPERATIONS" means the operations performed in accordance

with the Contract for the purpose of discovering Hydrocarbon accumulations and

for evaluating the extent and the volume of these accumulations, the reservoir

characteristics and their possible behaviour during production. The Exploration

Operations include the geological, geophysical and geochemical exploration, the

analyses and studies, the drilling, deepening, abandonment or completion of the

wells and their evaluations as well as any operations relating thereto.

7



1.39

"DEVELOPMENT OPERATIONS" means any operations performed according to

the General Development Program for the purpose of exploiting the Hydrocarbon

accumulations found in the subsoil of the Development Areas. These Operations

include:

-



The drilling, completion and sampling of the development well, the

drilling and completion of the well for gas or water injection;



-



The laying of gathering lines, the installation of separators,

reservoirs, pumps, artificial chargers and other production and

injection facilities required for the production, processing and

transportation of Hydrocarbons to the Hydrocarbon storage facilities

or to the offshore or onshore gas processing facilities; and



-



The laying inside or outside the Contract Area of pipeline to the

storage or delivery points, the setting up of these Crude Oil storage

facilities or Gas processing facilities and all ancillary operations

that are not clearly indicated herein but which are necessary for the

development and production of these Hydrocarbon accumulations and for

the delivery of Crude Oil and/or of the Gas to the Delivery Point, in

accordance with the Good Practices of the Oil Industry.



1.40

"PETROLEUM OPERATIONS" means all operations authorized by the Contract

related to the exploration, development, production, separation and processing,

storage, transportation and sale or transfer of Hydrocarbons to the exportation

point or to the Delivery Point agreed to in Benin or to the delivery point in a

refinery in Benin in accordance with the Contract; they cover the Natural Gas

processing operations but do not include the Crude Oil refining operations.

1.41

"PRODUCTION OPERATIONS" means the operations undertaken in order to

produce the Hydrocarbons of the Contract Area such as extraction, injection,

stimulation, processing, storage, transportation to the delivery point(s),

loading, including the exportation of these Hydrocarbons as well as the

maintenance and abandonment of all the necessary facilities.

1.42



"PARTIES"



means



the



Government



and



the



Contractor.



1.43

"TRANSITIONAL PERIOD" means the maximum period of three (3) months from

the date of signature of the Contract which is the Effective Date.

1.44

"CRUDE OIL" means the crude mineral oil, asphalt, ozokerite and all

other types of Hydrocarbons and bitumen in the solid or liquid form, in their

natural state or obtained from Natural Gas through condensation or extraction.

1.45

"DELIVERY POINT" means the final exit Point of the flowlines downstream

of the storage facilities from where the Oil or Gas is delivered for shipment.

The location of the Delivery Point shall be agreed to between the two (2)

Parties.

1.46

"COMMERCIAL PRODUCTION" means the quantity of Crude Oil or Natural Gas,

or both, which may be delivered to the Delivery Point according to a regular

production and sale program.

8



1.47

"TOTAL CRUDE PRODUCTION" means the quantity of Crude extracted from the

Contract Area after extraction of the water, foreign substances and after

deduction of the quantities used in the Petroleum Operations.

1.48

"WORK PROGRAM" means all plans prepared every year to carry through the

Petroleum Operations.

1.49

"GENERAL DEVELOPMENT PROGRAM" means a plan established for the

development of an Oil Deposit or a Gas Deposit agreed to between the Parties.

1.50

"SEME PETROLEUM PROJECT" (PPS) means the state company charged by the

Government of managing the Seme Oil Field. The Seme Petroleum Project and

activities may terminate at the end of the Transitional Period.

1.51

"EVALUATION WELL" means a well, other than an exploration well, drilled

for the purpose of evaluating the commercial viability of a geologic trap where

hydrocarbons have been discovered.

1.52

"EXPLORATION WELL" means any well drilled within the framework of the

Exploration Operations including dry wells and discovery wells.

1.53

"DEVELOPMENT WELL" means a well drilled in order to produce

Hydrocarbons from a known Reservoir that has been evaluated and tested, to

maintain the production increase, or to speed up the extraction thereof,



including



the



production



and



injection



wells.



1.54

"CONTRACT AREA" means all the geographic area defined by the two (2)

perimeters the coordinates of which appear in Appendix "A" and which are

represented on the map appearing in Appendix "B", with the exception of any part

for which the Contractor has, from time to time, abandoned or waived its rights

under the Contract. One of these perimeters include the Oil Deposit called Seme

and this perimeter shall be referred to in the Contract and in Appendixes "A"

and "B" as the "Seme Block"; the other perimeter shall be referred to as "Block

1". In the event of disagreement or conflict between Appendix "A" and Appendix

"B", Appendix "A" shall prevail.

1.55

"GOOD PRACTICES" means all good, safe, economic and efficient practices

generally accepted in the international oil industry.

1.56

"RESERVOIR" means the subsoil rock containing hydrocarbons in its pores

and having a common pressure system in its dimensions. This rocky body must be

capable of producing hydrocarbons in measurable quantities.

1.57

"BASEMENT" means on the one hand, the igneous, metamorphic or other

rocks which, by their nature, and in accordance with the knowledge generally

accepted in the international oil industry, cannot contain Hydrocarbon deposits,

and on the other hand, the impenetrable rocky substances such as salt and clay

domes as well as any other rock which may render impracticable or unjustifiable

from a financial viewpoint the continuation of drilling activities with the

modern drilling technology normally used in the international oil industry.

9



1.58

"SUBCONTRACTOR" means any natural person or legal entity hired by the

Contractor to provide services related to the Contract.

1.59

"LIBOR RATE" means the interest rate at closing for the dollar deposits

for a period of six (6) months on the London interbank market and published by

the London branch of "The Bank of America" or by any other bank agreed to

between the Parties, on the date in question or on the banking day immediately

preceding if the day in question is not a banking workday in London.

1.60



"CONTRACT



INTEREST



RATE"



means



the



"LIBOR



RATE" plus one percent.



1.61

"OIL PRODUCTION TAX" means the Royalty (proportional mining royalty) as

defined in the Code, and equal to a maximum of 12.5% of the Total Crude

Production.

1.62

first,

Year.



"QUARTER" means a period of three (3) consecutive months from January

April first, July first and October first respectively of each Calendar



1.63

"SALE TO THIRD PARTIES" means the sales of Hydrocarbons produced in the

Contract Areaand meeting the following conditions:

(a)



The



agreed



price



shall



be



the only consideration for the sale;



(b)

The sale conditions shall not be subject to any trade relation

other than that created by the actual sale contract between the seller and the

buyer or any of their Affiliates;

(c)

Neither the seller nor any of its Affiliates has a direct or

indirect interest in the resale or subsequent assignment of the Hydrocarbons

or of any derivative;

(d)

as a result



No

of



paid processing,

these sales.



exchange or barter agreement must take place



1.64 a)

"DEVELOPMENT AREA" means the part of the Contract Area which,

following the seismic information and the well data available, is reasonably

deemed to cover the horizontal area of a Hydrocarbon accumulation constituting a

Commercial Discovery and designated as such in an approved General Development

Program. The Development Area includes the depth corresponding to the

reservoirs that have been evaluated and tested between the surface and the

basement.

b)

"SEME AREA" means the prism formed by the surface points BEDC for

which the geographic coordinates and the map appear as Appendix B, on the one

hand, and by the depth between the sea level and the oil-water interface

of the producing reservoir H6,5 situated at two thousand one hundred (2,100)

metres under the sea level.

c)

"BLOCK 1" is defined by the area delineated by the points AFGH for

which the geographic coordinates and the map appear as Appendix B, the Beninese

coast constituting the North geographic limit and excluding the Seme Area

defined above.

10



ARTICLE II

OBJECT OF THE CONTRACT

2.1

By this Contract, the Government grants to the Contractor the exclusive

right to carry out Petroleum Operations in the Contract Area for the purpose of

exploring, developing and producing Hydrocarbons in this area, in accordance

with the provisions of the Code and the Contract, and in accordance with the

laws and regulations in force in the Republic of Benin. The State shall

implement all administrative procedures required to enable the Contractor to

enjoy its rights and fulfill its obligations.

2.2

The Contractor declares having the technical and financial capabilities

required and undertakes to carry out the Petroleum Operations in accordance with

this Contract and according to the Good Practices of the Oil Industry.

2.3

With regard to Block 1, once a General Development Program relating to a

Hydrocarbon Discovery has been approved as quickly as possible in accordance

with the terms of the Contract, the Contractor shall have full rights to carry

through the Development and Production Operations and to have the usufruct of

the financial benefits resulting from these activities, provided that the

obligations under the Contract and the Code have been fulfilled.

2.3.1

With regard to the Seme Block which includes an Oil Deposit, the

Contractor shall enjoy the rights listed in Article 2.3.1. as from the Effective

Date of the Contract, subject only to the provisions of Article XXXII.

2.4

The Contractor shall provide all technical, financial, human and

economic resources required for the Petroleum Operations. Subject to the

proportional participation of the State, if applicable, all costs and

disbursements incurred for the Petroleum Operations shall be at the

responsibility of the Contractor and shall be borne exclusively by it.

Furthermore, the Contractor shall be technically, financially and economically

responsible for the Petroleum Operations during the validity period of the

Contract.

2.5

The Minister, in his capacity as the Government representative, shall be

responsible for the supervision of the Petroleum Operations in order to ensure

that the Contractor fulfills its obligations in accordance with the Contract.

The Minister shall exercise this duty through its technical departments at any

reasonable time. The Contractor shall be required to provide easy access to its

facilities, to the Minister's representatives in order to enable them to

discharge their duties. The costs related to these duties shall be borne by the



Government.

11



ARTICLE III

VALIDITY PERIOD OF THE CONTRACT

3.1

The Contract shall enter into effect from the date of its signature and

shall end on the date fixed below, subject to the provisions of Article XXVI

relating to termination and those of Article XXXII relating to the Transitional

Period.

3.2



VALIDITY



PERIOD



RELATING



TO



BLOCK



1



3.2.1

With regard to Block 1 only, the period covered by the Contract shall

be divided into two periods: an exploration period and an exploitation period.

3.2.2

The exploration period shall be for an initial period of two years,

with two (2) possible extension phases of two years each. These extensions

shall be granted by right, subject to the provisions relating to

relinquishments, provided that the Contractor has met all its work obligations

and expense commitments and other substantial obligations relating to the

preceding phase.

3.2.3

Provided it has fulfilled all the obligations relating to the initial

phase, the Contractor may request the Minister in writing for an extension of

the exploration period beyond the initial phase, at least sixty (60) calendar

days before the end of said phase. If this request has not been submitted in

time and if a commercial Discovery has not been made, the Contract shall expire

at the end of the initial phase of the exploration period.

3.2.4

Subject to the provisions relating to termination and provided no

Hydrocarbon Discovery has been made during the exploration period, the Contract

shall expire at the end of this period. If at least one (1) Commercial

Discovery has taken place before the end of the exploration period, the Contract

shall remain in effect with regard to the corresponding Development Areas.

3.2.5

If, at the expiration date of the initial exploration period or of one

of the extension phases, an exploration well is in the process of drilling,

coring, casing, testing or closing, the Minister shall grant to the Contractor a

special extension in order to enable it to complete the drilling, coring,

casing, testing and/or the closing of the well in question, to evaluate the

results of these operations and to determine if they constitute a Hydrocarbon

Commercial Discovery. This special extension cannot, under any circumstances,

extend the total exploration period by more than six (6) months.

3.2.6

If a Natural Gas Discovery occurs that the Contractor considers as

having the potential of being commercially viable, in addition to the procedures

and conditions specified herein, the Minister may grant to the Contractor a

special extension of the initial exploration phase for a minimum period of two

(2) years to allow the full evaluation of this Discovery. To that end, the

Minister may ask the Contractor to carry out additional studies or tasks which

would reasonably appear necessary for the good evaluation of the Natural Gas

Discovery.

12



3.2.7

In the event of a Hydrocarbon Commercial Discovery, the Government

shall grant to the Contractor by right, at the request of the latter, an

exploitation permit covering the Development Area, the perimeter of which will

have been approved as part of a General Development Program in accordance with

the provisions of Article IX. The duration of the exploitation permit during

which the Contractor shall be authorized to ensure the production of each of the

Oil Deposits and Gas Deposits discovered shall be fixed at twenty-five (25)



years from the day on

Discovery in accordance



which the Discovery

with the provisions



has been declared a Commercial

of Article IX hereof.



During the period of the Contract, the Contractor may relinquish one or several

Development Areas, object of an exploitation permit subject to the Government

approval.

3.2.8

If, at the expiration of the twenty-five (25) year exploitation period

defined above, a commercial exploitation remains possible, the Contractor may be

authorized, at its request, to continue the exploitation for a further period of

ten (10) years, provided that it has fulfilled all its contractual obligations

during the preceding exploitation period.

3.3



VALIDITY



PERIOD



RELATING



TO



THE



SEME



BLOCK



The Seme Block being an Oil Deposit as of the Effective Date, it shall

constitute as of that date a Development Area and the Minister shall grant to

the Contractor an exploitation permit covering the Seme Block. This

exploitation permit relating to the Seme Block shall expire when the Hydrocarbon

commercial exploitation shall not be viable anymore in the Seme Block, either in

the present Oilfield of Seme, or in any other Reservoir contained in the

perimeter of Block 1, with a maximum period of twenty-five (25) years and with a

possible extension of ten (10) years.

3.4



PROVISIONS



RELATING



TO



BLOCK



1



3.4.1

At the expiration of the last exploitation permit granted to the

Contractor, the rights and obligations defined in this Contract shall be null

and void.

3.4.2

The Contractor shall provide to the Government for the granting of an

exploitation authorization, an exact delimitation of the perimeter in such a

manner that it includes all the presumed area of the discovered Field.

3.4.3

If, during operations subsequent to the discovery, it appears that the

field has an extension exceeding that initially anticipated according to the

preceding paragraph, the Government shall grant to the Contractor, under the

exploitation authorization already allocated, the additional area in such a way

so that it covers all the field, provided that the above mentioned extension

forms an integral part of the Contract Area as defined at the time of said

modification. If said additional area is outside the Contract Area, the

Minister shall grant to the Contractor this additional area provided that it is

not the subject of mining rights already granted to a third party or of a

request aiming at granting such rights.

13



ARTICLE IV

OWNERSHIP OF ASSETS, DATA AND HYDROCARBONS

4.1



OWNERSHIP



OF



ASSETS



4.1.1

The lands shall become the property of the State as soon as they are

acquired by the Contractor. The Minister must cooperate in order to complete

the procedures on behalf of the Contractor and at the written request of the

latter, for obtaining the licences, permits, surface rights, easements, rights

of free access to the Contract Area and exit therefrom, the utilization of the

waters and any other types of encumbrances on any land or water expanse of

public or private nature to enable the Contractor to finalize the Petroleum

Operations on the territory of Benin, in accordance with the laws in force in

the country.

4.1.2

Notwithstanding the above provisions, the ownership of movable and

immovable properties acquired for the Petroleum Operations shall be



automatically transferred by the Contractor to the State as soon as their cost

has been fully amortized by the Contractor, or, otherwise, at the end of the

Contract. At the expiration of the Contract, the Contractor shall be required

to forward to the Beninese State, through the Minister and unencumbered, the

ownership of the lands, works, facilities, appurtenances and permanent equipment

which it shall have acquired during the performance of the Petroleum Operations.

The Contractor shall then be released from any obligation with regard to said

properties, including any objection resulting from abandonment procedures, and

restoration of environment, as concerns said properties, in the event of

contribution of activities of the field. During the validity period of the

Contract, the Contractor shall keep and safeguard in a good condition the

movable and immovable properties acquired for the execution of the Operations.

4.1.3

The ownership of the properties rented or of the movable properties

leased belonging to subcontractors or to Affiliates and the intellectual

property of third parties shall remain with said Subcontractors or Affiliates or

third parties

4.1.4

During the period of the Contract, the Contractor shall be authorized

to use and to make use of all movable and immovable properties acquired for the

Petroleum Operations under the Contract. The Contractor shall be authorized to

transfer or to sell said properties if they are no longer required for the

Petroleum Operations. The beneficiary of the sale revenues from these

properties shall be as follows:

.

If the ownership of said properties has been transferred to the State, the

proceeds must be paid to the latter;

.

the



The Contractor shall keep these revenues when the properties have not been

subject of any amortization;



.

In the event of partial amortization, the proceeds corresponding to the

amortization proportion must be paid to the State.

14



The disposal or transfer of movable or immovable properties during the period of

the Contract must have the prior approval of the Minister.

4.2



OWNERSHIP



OF



DATA



The State is the owner of all the geological, geophysical and geochemical

information and of the data relating to the drilling, engineering, recording and

production of any other data, samples, logs, coring, tapes, maps,

interpretations, reports and any other support or information obtained at the

end of the Petroleum Operations. However, the Contractor shall be authorized to

keep this information, at no cost, and to use same for the Petroleum Operations

subject to the obligations connected to their confidential nature.

The Government will provide the Contractor access to all the technical,

operational, accounting and financial information available, this list not being

exhaustive, at the Effective date of the Contract. It is understood that the

Contractor will treat these data and information confidentially, in according

with article 22 of the present Contract.

4.3



OWNERSHIP



OF



HYDROCARBONS



All the Hydrocarbons contained in the Reservoirs of the subsoil of the Contract

Area or produced in the Contract Area belong to the State in accordance with the

Code and with the Constitution of the Republic of Benin. The Contract does not

confer any ownership right on the Contractor with regard to the Crude Oil and/or

Gas extracted from the Contract Area, which shall continue to be the property of

the State until they are measured at the Delivery Point. The ownership rights

of the Contractor with regard to the Crude Oil and/or to the Gas in accordance



with the provisions

Delivery Point.



of the Contract shall be granted to it at the appropriate



4.4



THE



OWNERSHIP



OF



ASSETS



OF



THE



SEME



OIL



PROJECT



The assets belonging to the Seme Oil Project, property of the Government, shall

be handled from the end of the Transitional Period as stipulated in Article 32,

as follows:

A. The following shall be put at the disposal

matter of priority, for the validity of the Contract:



of the



-



A storage facility including a portion of the land

construction of a quay.



-



A buoy mooring of CBM-PLEM type.



-



A loading facility.



-



The Contractor shall be allowed to use the resupply

harbour under conditions agreed by the parties.



Contractor,



as a



intended for the



base of Cotonou



15



The Government shall guarantee to the Contractor that the facilities shall be

managed in accordance with the good practices of the international oil industry.

The Contractor will finance the restoration of the Seme facilities, and will

manage these facilities according to Good Petroleum Practices, and taking into

account the production forecast for Seme and Block 1, in accordance with Article

32.

If other users are involved, the Government shall exploit its ownership rights

through the Bureau of Petroleum Operations or any other structure designed.

B.

With regard to the assets directly associated or related to the

Production Operations and which include, in particular, the producing wells, the

Platforms including the test and production separators, the oil pipelines, the

submarine cables, without this listing being restrictive, shall be put at the

disposal of the Contractor, free of charge, subject to the provisions of Article

18.5. The Contractor shall be have the right to use, with the Government

approval, some existing wells in order to find new reserves in the deep

reservoirs according to the Good Practices of the Oil Industry.

C.

The Parties shall agree on the methods of sale of the surplus spare parts

available. In the event that the Contractor is interested to purchase all or

part of this surplus, it will repay the price thereof.

D.

Seme



The other assets which are not directly related to the operations of the

Field shall remain the property of the Government.

16





ARTICLE V

RELINQUISHMENTS

5.1

At the end of the first extension phase of the exploration period and

provided the Contractor has discharged all its obligations connected to this

phase, if the latter decides to continue with the Exploration Operations in the

Contract Area during the extension phases for said period, it shall relinquish

fifty percent (50%) of the remaining Contract Area, after deduction of any

Development Area and of the Seme Block.



5.2

At

Contractor



the end of the last extension phase of the exploration period, the

shall only keep the Development Area or Areas if any.



5.3

The Areas that have been relinquished by the Contractor must be lying

together and must be of an appropriate geometrical form in order to enable the

performance of the Petroleum Operations by other entities. The Contractor must

notify the Minister in writing of the Area or Areas it intends to relinquish, no

later than sixty (60) days before the end of the period considered, and shall

include a map showing the geographic location and giving the coordinates of the

connection points of the boundary lines. Within thirty (30) days following the

notification date, the Minister must inform the Contractor of its decision and

the Contractor must comply therewith.

5.4

From the date of expiration of the Contract, the Contractor is supposed

to have transferred all the Contract Area.

5.5

Two months following each relinquishment, the Contractor must report to

the Minister the surface areas to be returned and forward to him all documents

and files related thereto as well as the facilities contained thereon, but will

have the right to make a copy of documents and file, while respecting the

confidentiality of the data.

17



ARTICLE VI

MINIMUM WORK OBLIGATIONS

6.1

The Contractor must commence the Petroleum Operations as of the

Effective Date of this Contract subject to the provisions of Article 32. To

that end, the Contractor shall inform the Minister of the nominal composition of

the team responsible for the conduct and execution of the Contract in Benin as

well as the main terms of its agreement with its partner or partners.

6.2

During the initial Phase of the exploration period, the Contractor shall

undertake to do the following works:

-



Reprocessing and interpretation of 500 km of 2D seismic

acquisition of 300 km of seismic lines during this period.



-



Exhaustive evaluation of the productivity of the gas contained in the

H8 reservoir of Seme and assessment of the economic potential thereof.



-



Drilling of one (1) well in Block 1 in accordance with Clause 6.5. In

the event the deep reservoirs under the Seme Area prove to be a more

attractive prospect than in Block 1, this drilling shall be carried

out in said deep reservoirs.



6.3

least



During the first extension phase

complete the following works:



lines,



or



of 2 years, the Contractor must at



-



Acquisition of 300 km of seismic lines, if the acquisition of these

seismic lines has not been realized during the initial phase;



-



Drilling of a well in accordance with Clause 6.5.



6.4

During the second extension of the initial phase of the exploration

period, the Contractor must at least complete the following works:

-



Acquisition and reprocessing

equivalent of 3D seismic.



of 300 km of 2D seismic lines or their



-



Drilling of a well in accordance with Clause 6.5.



6.5

Any Exploration

following depths:



Well



drilled



must



at least be drilled at one of the



(a) the basement

(b) H8 horizon

(c) 2800 (two thousand eight hundred) metres TVD (True Vertical Depth)

18



(d) at the depth under which any additional drilling becomes impracticable

and would not be carried out by a prudent and reasonable operator in identical

or similar conditions according to the Good Practices of the Oil Industry.

(e) at any other depth defined by the Parties by mutual agreement.

6.6

If during a phase of the exploration period the Contractor undertakes

works which exceed the minimum work obligations relating to this phase, the

excess shall be deducted from the work obligations relating to the following

phase.

6.7

The difficulties which shall occur during the implementation of the

provisions of this Article shall be first settled in accordance with the

provisions of Articles 8.2.2 and 9.9.

19



ARTICLE VII

JOINT TECHNICAL COMMITTEE

7.1

Within three (3) months following the Date of signature of the Contract,

the Parties shall form a Joint Technical Committee (CCT) composed of six (6)

members, three (3) representing the Minister and three (3) representing the

Contractor, including the General Manager of the Contractor.

7.2

Notwithstanding the provisions of Article 2 and the rights and

obligations of the Contractor relating to the daily management of the Petroleum

Operations, nor its other rights and obligations mentioned in the Contract, the

CCT shall have the main following objectives:

-



To ensure the good communication and cooperation between the Parties;



-



To review on the conduct and

in particular:

(i)



management of the Petroleum



Operations,



the evaluation of the results of the drilling,

geophysical and petroleum engineering programs;



geological,



(ii) the budgets and their execution;

(iii) the important modifications of the work programs;

(iv) the allocation of the markets relating to the work programs;

(v)



any other matters submitted to it by the Parties.



The CTT shall make and forward recommendations to the Parties with regard to all

the matters reviewed.

7.3

The CCT shall be chaired by one of the representatives designated by the

Minister. One of the representatives designated by the Contractor shall act as



Secretary. The Parties may send other representatives to the meetings of the

CCT as experts or substitute members.

7.4

The CCT shall hold an ordinary meeting at least once every six (6)

months or when the members decide by mutual agreement. The Chairman of the CCT

may convene extraordinary meetings at the request of the Minister or of the

Contractor by giving to the members at least fifteen (15) days' notice, or a

shorter notice if the Parties so decide. The corresponding notice must indicate

the date, the place and the agenda of the meeting.

7.5

The quorum for the

members, two (2) for each



meetings of the CCT shall be composed of four (4)

Party.



7.6

The CCT submits his conclusions to the Parties. In the event of

disagreement, between Parties, they will act according to the provisions of the

present Contract.

20



ARTICLE VIII

PERFORMANCE OF THE OPERATIONS,

WORK PROGRAM, BUDGETS, REPORTS

AND CONTROL

8.1



PERFORMANCE



OF



THE



OPERATIONS



8.1.1

During the period of the Contract, the Contractor shall carry out

directly the exploration and exploitation activities in the Contract Area. In

order to better undertake its activities, it shall be authorized to hire

specialized subcontractors. However, the Contractor shall keep the control and

the general responsibility of the operations or activities undertaken.

8.1.2

The Contractor must proceed diligently with the performance of the

Petroleum Operations in accordance with the Good Practices of the Oil Industry,

taking into account the local conditions and other special conditions in the

Contract Area.

8.1.3

The Contractor must first notify the Minister of any substantial and

planned Petroleum Operations such as, for example, the geological or geophysical

research and the start-up of the well drilling activities. The Contractor must

also notify the Minister in writing of any suspension of drilling or well

abandonment. If this notification is impossible, the Contractor must notify the

Minister in writing of this suspension or abandonment within twenty-four (24)

hours.

8.2



WORK



PROGRAM



AND



BUDGETS



8.2.1

Within ninety (90) days following the Effective Date of the Contract,

the Contractor must prepare the first Work Program and its budget. If the

Effective Date of the Contract occurs the first day of the month of July or

before, the first Program and its budget shall be prepared for the remainder of

the corresponding calendar year. If the Effective Date of the Contract occurs

after the first day of the month of July, this first Program and its budget

shall be prepared for the current calendar year as well as for the following

calendar year. The Contractor must submit the Work Program and its budget for

the Minister's approval. Subject to the above provisions, the Contractor shall,

no later than October 30 of each calendar year, prepare a Work Program and a

budget for the following calendar year and submit same for the Minister's

approval. Within the month following the date of receipt of the Work Program

and of the budget, the Minister shall approve same as proposed or shall suggest

amendments, failing which the Work Program and the budget shall be deemed

approved. The Work Programs during the exploration period must include the

minimum works as stipulated in this Contract.



21



8.2.2

In the event the Minister wishes to make amendments to the Work

Program and to the corresponding Budget, he must advise the Contractor thereof

in writing no later than fifteen (15) days following the receipt of the above

mentioned documents and the Parties shall meet and attempt to reach an agreement

on the proposed amendments. If the Contractor and the Minister do not reach an

agreement on the proposed amendments no later than two months after the date of

receipt of the Work Program and the Budget, an Expert shall be called upon to

settle the matter in accordance with the provisions relating to arbitration and

expert evaluation.

8.2.3

The Contractor may, with the Minister's approval, revise the Work

Program during the calendar year in question in order to be able to take into

account newly acquired information, a revised evaluation of the conditions

concerned, or any other valid reason.

8.3



REPORTS



8.3.1

Within the framework of this Contract, the Contractor shall prepare

and keep up to date all the records relating to the Petroleum Operations in the

Contract Area.

8.3.2



Subject



to



its general rights and obligations, the Contractor shall:



(a) Register in an original or reproducible version of good quality, or on

magnetic support, if any, any geological and geophysical information and any

data related to the Contract Area and acquired by the Contractor.

(b) Keep all the files containing all the details

aspects:



concerning the following



i)



The drilling,

implementation,

deepening,

sealing or abandonment of the wells;



ii)



The formations crossed by the wells;



production



tests,



iii) The casing laid in the wells and any modification to said casing;

iv)



Any hydrocarbons, water and other minerals of economic benefit or

dangerous substances encountered;



v)



The areas in which geological or geophysical activities have been

carried out.



8.3.3

The well logs, maps, magnetic tapes, coring and samples, and other

geological and geophysical information obtained by the Contractor during the

Petroleum Operations shall belong to the Government, and shall be forwarded to

it as soon as they have been obtained or prepared, and the Contractor shall have

the right to make copies of said documents and files, subject to the observance

of the confidentiality clauses.

8.3.4

Parties



During the execution of its contractual

otherwise agree, the Contractor shall:



a) Keep copies of the material

the Contract;



constituting



obligations,



unless the



the Data during the period of



b) Keep for a period required by Petroleum Operations, with the Government

approval, the original data provided that said data can be reproduced and that

copies thereof have been provided to the Minister.



22



c) Export for processing, review or laboratory tests and for a period of

one year, the samples and any matters constituting the petroleum data, provided

that samples of equivalent dimensions and quality or, when such data may be

reproduced, copies of an equivalent quality have been forwarded to the Minister.

8.3.5

The Contractor shall regularly inform the Minister of the main

developments occurring in the Petroleum Operations and shall provide him with

all available information, data, reports, evaluations and interpretations

related to the Petroleum Operations. In addition, the Contractor shall:

a) Prepare daily drilling reports within the framework of its activities;

b) Prepare and forward to the Minister a monthly report within a period of

fifteen (15) days following the end of the month concerned which shall include a

description of the activities covered during said month with plans and maps

indicating the sites where the works described have been executed;

c) Prepare and forward to the Government a quarterly report, within a

period of thirty (30) days after the end of each Calendar Quarter, which shall

include a description of the activities covered during said quarter with plans

and maps indicating the sites where the works described have been executed;

d) Prepare and forward to the Government an annual report, within a period

of two (2) months after the end of each Calendar Year, which will integrate and

develop the revised quarterly reports, if required, of the Calendar Year

considered.

8.4

The Minister shall

the DIRECTORATE OF ENERGY

(BOP).

8.4.1



The



duties



of



THE



assume his obligations under this Contract through

(DEN) and the DEPARTMENT OF PETROLEUM OPERATIONS

DIRECTORATE OF ENERGY (DEN) shall be inter alia:



-



to ensure that the Petroleum Operations conducted by the Contractor or

other government entities comply with the oil policy of the State and

to the applicable regulations;



-



to bring as much as possible to the Contractor any assistance required

in order to enable it to fulfill its obligations within the framework

of the present Contract;



-



to ensure that the Contractor

transfer and of training of

Petroleum Operations.



8.4.2

inter



The

alia:



duties



of



implements a true policy of technology

Beninese nationals in the field of



THE DEPARTMENT OF PETROLEUM OPERATIONS (BOP) shall be



-



to guarantee the financial

State;



settlements between the Contractor and the



-



to receive, value and market the State's Hydrocarbon share;

23





-



to ensure that the cost accounting of the expenses and the keeping of

the records and of the conduct reports of the Petroleum Operations

shall be undertaken according to this Contract and with the accounting

principles generally accepted in the oil industry.

24





ARTICLE IX

DECLARATION OF COMMERCIAL DISCOVERY

AND DESIGNATION OF THE DEVELOPMENT AREA



9.1

As soon as a Discovery of Hydrocarbons is made in the Contract Area, the

Contractor must immediately report same to the Minister and the provisions of

this Article shall then apply. In the event of a Gas Discovery, the provisions

of the relevant Article shall apply should there be a conflict or a difference

in the processing of this Discovery with this Article.

9.2

After the Discovery of Hydrocarbons and as soon as the Contractor is

able to do so, and in any case within thirty (30) days following said Discovery,

the Contractor must forward to the Minister a first report of Discovery.

No later than two (2) months following the Discovery, the Contractor shall

forward to the Minister a detailed report on the Discovery, indicating whether

this Discovery must be evaluated or not. If the Contractor deems that the

Discovery is worth being evaluated, the report must include an evaluation

program and a schedule of activities in order to implement an adequate and

efficient evaluation. The Contractor must carry through the evaluation program

submitted to the Minister during the exploration period according to the

approved evaluation program and schedule of activities.

9.3

No later than ninety (90) days following the end of the evaluation

program, the Contractor shall submit for the Minister's review a detailed

evaluation report proving the commercial viability of the proposed Development

Area. This report must include:

-



The description of the Development Area, in particular the structural

configuration, the physical properties and the extent of the reservoir

rocks, the surface areas, the thickness and the depth of the producing

areas;



-



An estimate of the initial and recoverable oil and gas reserves, the

characteristics of the recovery, the expected production return by

reservoir;



-



An estimate of the number of wells required for an efficient drainage

of the reserves, the fluid characteristics including, in the case of

Crude Oil, the density, the sulfur, sediment and water content and the

shrinkage of the product;



-



The economic projections and the expected cash flows.



9.4

The Contractor must declare in the report whether in its opinion the

Discovery is commercially viable, and in this case, it shall be entitled to

develop same and to produce the Hydrocarbons in accordance with the provisions

of this Contract.

25



9.5

Within thirty (30) days following the date of submission of the report

in which the Contractor advises the Minister of its opinion that the Discovery

is commercially viable, the latter shall notify his approval to the Contractor

in writing, and the date of approval by the Minister shall be the "Date of

Commercial Discovery". If at the end of this thirty (30) day period, the

Minister has not notified said approval in writing, the Date of Commercial

Discovery shall be the day following the expiration of the thirty (30) days

mentioned above. The Minister shall then grant to the Contractor the



exploitation



permit



if



the



latter



requests



it.



9.6

If the Contractor deems that the Discovery is not commercially viable,

it must advise the Minister of the reasons on which it has based its decision.

If the Minister challenges the grounds of the technical or financial analysis of

the Contractor on the non-commercial nature of the Discovery, or if for any

other reason he deems that the Discovery may be economically developed by the

Contractor in accordance with the clauses and conditions of the Contract, the

Minister must then, within sixty (60) days if he so wishes, submit the matter of

the commercial viability to an Expert in accordance with the Contract. If the

Expert confirms that the Discovery is commercial, the Contractor may, within

thirty (30) days following the date of receipt of the Expert's decision, either

declare that the Discovery is a commercial Discovery under the provisions of the

Contract and the date of declaration shall become the Date of Commercial

Discovery, or waive its rights regarding the Discovery. In this case, the

Minister shall have the right to develop the area of the Discovery and to

produce Hydrocarbons in accordance with the provisions relating to sole risk

operations. The Contract shall remain in effect on the remaining part of the

Contract Area.

9.7

Within ninety (90) days following the Date of Commercial Discovery, the

Contractor must submit to the Minister a General Development Program indicating:

(a) the proposed Development Area;

(b) the Development Operations to be carried out, including any additional

delineation of the Development Area and the method of development of the

Associated Gas, if any;

(c) the Contractor's plans concerning the drilling and completion of the

wells, the new production, storage, transportation and delivery facilities

required for the production of Hydrocarbons. The plans must contain the

following information:

(i)



the expected number of Development Wells and their positioning;



(ii) the details relating

storage facilities;



to the



production



equipment



and to the



(iii) the delivery points of Crude Oil and Natural Gas; and

(iv) the details of any other

Hydrocarbon Operations.



technical



equipment



required



for the



(d) the estimated projections of Crude Oil and Natural Gas production from

the Oil or Gas Deposits, and the estimated commercial duration of said deposits;

(e) the cost estimates of the equipment and current expenses;

26



(f) the economic feasibility studies prepared by the Contractor and the

other methods, if any, devised for the development of the Discovery taking into

account:

(i)



its location;



(ii) any pertinent meteorological condition;

(iii) expected investment costs and current expenses; and

(iv) any other information required for its evaluation.

(g) the safety measures to be adopted during the Development and Production



Operations, including the emergency measures;

(h) the measures to be adopted for the protection of the environment.

(i) the unforeseeable events that may affect the Contractor's

during the implementation of the General Development Program.



capability



9.8

The General Development Program proposed by the Contractor must be

prepared according to the geological, engineering and financial principles and

according to the Good Practices of the Oil Industry. Furthermore, it must be

realized with a view to ensuring the optimum recovery of Hydrocarbons of the

Development Area and to preventing their wasting.

9.9

The General Development Program of the Contractor may be reviewed by the

Minister who shall give his approval if he deems that it has been prepared

according to the above provisions. If the Minister deems that the General

Development Program submitted by the Contractor has not been prepared according

to these provisions, he shall suggest that revisions be made thereto and the

Contractor may amend same in reply. If within ninety (90) days following the

date of submission of the Program, the Minister and the Contractor cannot agree

on said Program, the matter or matters which are the subject of a disagreement

must be submitted to an Expert who shall settle same. In case of disagreement

and submission to an expert, the exploitation period of 25 years shall not

include the period spent by referring to the expert (including the procedure of

this submission).

9.10

During the course of the Development and Production Operations, the

Contractor may suggest additions or revisions to the General Development

Program. He shall then submit same to the Minister for review and approval,

utilizing the procedures detailed in article 9.9. If within a period of eighty

(90) [N.B. Sic] days following the date of submissions of the additions or

--revisions of the General Development Program, the Minister and the Contractor

cannot agree, the question or questions which are the subject of the

disagreement shall be submitted to an expert, mutadis mutandis according to the

procedure specified in article 9.9 and the exploitation period of 25 years shall

not include the period of said procedure.

27



9.11

If the Contractor wishes to finance the Development Operations with

funds obtained from banks or other sources of financing, the Minister must

assist the Contractor by providing all the information that the banks or sources

of financing may reasonably request, provided that the Minister does not have to

assume any additional obligation of any type, whether financial or otherwise.

28



ARTICLE X

SOLE RISK OPERATIONS

10.1

If during the exploration period, the Minister wishes to test

additional reservoirs at the final depth point agreed upon, or deepen the well

and test deeper reservoirs than this final depth point, the Government shall

have the right, subject to the provisions of Clause 10.4, to request the

Contractor, by notice, to test certain additional reservoirs or to continue the

drilling and test new reservoirs, at the exclusive risk and on behalf of the

Government, until the Government objectives have been reached. The Government

shall notify the Contractor as soon as possible before or during the drilling

but under no circumstances after the Contractor has started the well completion

or abandonment activities.



10.2

If during the exploration period, the Parties cannot agree on the

Government recommendation for the drilling of additional exploration wells, the

Minister shall have the right after the initial period to request the Contractor

to drill in the Contract Area at the sole risk and expense of the Government one

(1) exploration well provided that this Operation does not delay, hinder and

disturb the exploration and evaluation activities of the Contractor. In this

case, the Minister shall have a maximum period of six (6) months in which to

provide the Contractor with a well site report indicating the drilling details

as well as the financing plan of the operation in question.

10.3

If the operations described under Clauses 9.3, 10.1 or 10.2 lead to a

Discovery or to a Commercial Discovery, the Minister shall have the right, at

its exclusive expense, risk and benefit, to evaluate said Discovery and/or to

develop and produce the Oil from the reservoir connected to this Discovery. The

Contractor shall notify the Minister in writing, before the beginning of the

commercial production of the oil reservoir discovered within the framework of

said sole risk operations, if it wishes to be responsible for the future

development and/or production operations of said oil-bearing reservoir according

to the terms of this Contract. In this case, the Contractor shall pay in cash

or in kind to the Minister, in addition to one hundred percent (100%) of the

exploration costs and the exploration immobilization costs, if any, incurred by

the Government with regard to the sole risk operations and connected to the

discovered oil-bearing reservoir, an additional amount equal to three hundred

percent (300%) of said exploration and immobilization costs.

10.4



The



conditions for the execution of the sole risk operations shall be:



(a) The production tests of additional formations or the penetration and

the production tests of deeper formations or the drilling of additional

exploration wells must be technically feasible;

(b) The deepening of a well under the exclusive risk operations

take place if the well has already penetrated the producing reservoirs;

(c) No exclusive risk exploration well may be drilled in an

area or on the site of a Commercial Discovery;



may not



exploitation



29



(d) The Minister may hire a third party for the performance of the sole

risk operations mentioned above. However, the Minister cannot hire a third party

for this purpose without having first offered to the Contractor a preemption

right for the execution on his behalf of said exclusive risk operations at

conditions similar to those acceptable by said third party. If the Contractor

does not accept to perform these operations within sixty (60) days from the

receipt of the Minister's notice, the latter shall then be at liberty to hire

the third party under the conditions that this third party shall observe the

confidentiality clauses regarding data, reports and information held or prepared

by the Contractor and received by said third party within the framework of the

present article or of article IX and in agreement with article XXII.

30



ARTICLE XI

ANNUAL DEVELOPMENT AND

PRODUCTION PROGRAMS

11.1

The Contractor shall be required to carry through the Production and

Development Operations in all the Development Areas in accordance with the

General Development Programs and according to Good Practices of the Oil

Industry.



11.2

The Work Program submitted for the Calendar Year during which a

Commercial Discovery occurs, must be modified by the Contractor within sixty

(60) days following the date of approval of the General Development Program in

order to comply with the latter.

11.3

The Work Programs and the budgets corresponding to the Development and

Production Operations must have as objective the efficient and economic

exploitation of all the Development Areas according to the Good Practices of the

Oil Industry. The Minister shall approve the Work Programs and the budgets

prepared and submitted in accordance with the provisions of this Contract.

Within thirty (30) days following the date of receipt of a Work Program and a

budget, the Minister shall approve same as proposed or shall suggest that

amendments be made; if no approval notice or suggestion of amendments has been

received within said period of thirty (30) days, the Work Program and the budget

shall be deemed approved.

11.4

If the Minister wishes to amend the Work Program or the corresponding

budget, he must inform the Contractor in writing no later than fifteen (15) days

following the receipt of the documents mentioned above. The Parties shall

consult each other and shall endeavour to agree on the amendments suggested. If

the Minister and the Contractor do not reach an agreement concerning the

amendments suggested no later than two (2) months after the date of receipt of

the Work Program and the corresponding budget, an Expert shall be called upon to

settle the matter in accordance with the provisions relating to arbitration and

expert evaluation. The twenty-five (25) year exploitation period, or the

additional period of ten years, if applicable, shall not include the time spent

for referring the matter to an expert (including the procedure for same).

11.5

The Contractor may, with the Minister's approval, revise the Work

Program and the budget during the Calendar Year in question in order to be able

to take into account newly acquired information, a revised evaluation of the

conditions concerned, or any other valid reason.

31



ARTICLE XII

GOVERNMENT PARTICIPATION

12.1

The Government shall have the option to acquire a maximum participation

of 15% of the rights and obligations of the Contractor relating to a discovery

when the combination of the daily production of all the discoveries of the

Contract Area reach for the first time a level of 20,000 barrels during at least

six (6) consecutive months.

12.2

The Government must exercise its option of participation by written

notification to the Contractor within thirty (30) days following the last day of

the 6th month of the production level of 20,000 barrels/day. In the absence of

a written notice during this period of thirty (30) days, the option shall be

deemed refused.

12.3

If the Government exercises its option of participation in accordance

with Article 12.1, the Contractor shall assign to the Government the portion

that has been claimed. To that end, the Contractor shall propose a draft

agreement for the Minister's evaluation.

12.4

The Government Participation shall take effect from the date of receipt

by the Contractor of the written notification mentioned in Article 12.2. The

Government shall then pay its share of the Petroleum Costs, in proportion to

said participation, when said costs have been committed by the Contractor.

12.5

If the Government exercises its option of participation, it will

reimburse to the Contractor in proportion to said participation, its share of



the Petroleum Costs incurred by the Contractor with respect to the Contract Area

before the date on which its decision to participate has been notified to the

Contractor who shall assist it without cost in the search for necessary funds.

Said share of Petroleum Costs that is reimbursable to the Contractor shall bear

an interest from the date on which the Petroleum Costs have been incurred until

the actual date of participation by the Government, at the interest rate of the

contract fixed the day before the settlement date.

12.6

The reimbursement mentioned in Clause 12.5 shall be at the option of

the Minister and notified to the Contractor,

-



either in cash by payment in dollars

by mutual agreement,



within a period to be determined



-



or in kind through lifting by the Contractor of a portion of the

Hydrocarbon share stipulated in Article 13, to which the Government is

entitled, up to fifty percent (50%) of said share. The value of this

portion being calculated in accordance with the provisions of Article

16, and this share shall be equal in value to the amount due on the

date of notification mentioned in Article 12.2, plus the interests

related thereto calculated according to Article 12.5.



32



12.7

If during the three (3) months following the due date for reimbursement

agreed to between the Parties, the Government does not pay to the Contractor its

share of the Petroleum Costs as stipulated in Clause 12.5, the Contractor shall

have the right to retain fifty percent (50%) of the share of Profit-Oil of the

Government until total recovery of said costs.

12.8

If the Government exercises its option of participation, the Minister

shall establish as soon as possible with the Contractor, an operating agreement

in accordance with the international Petroleum Operations which shall govern the

rights and obligations of the Parties.

33



ARTICLE XIII

COST RECOVERY AND

PRODUCTION SHARING

13.1

Subject to the provisions relating to participation, the Contractor

shall assume and pay all the Petroleum Costs incurred during the execution of

the Petroleum Operations, and it shall recover said costs according to the

methods defined in Accounting Appendix D.

The costs directly attributable to the development and production of

Non-Associated Gas shall be subject to a specific agreement in accordance with

the provisions of this Contract.

However, the costs directly attributable to the deepening of the wells with a

view to evaluating and testing the gas from the Seme Field shall be recoverable

in accordance with the provisions of Article 13.2b hereof.

13.2

The Petroleum Costs, within the limits authorized by the provisions of

Appendix "D", shall be recovered from the Crude Cost Recovery, limited every

year to sixty-nine percent (69%) of the Available Crude for Block 1, and for the

Seme Block to seventy-nine percent (79%) of the Available Crude for the Year

considered.

The



cost



recovery



shall



occur



as



follows:



(a) The recovery of the exploitation costs shall be made entirely

the Year when such costs have been incurred.



during



(b) The recovery of the exploration costs shall be made from the start-up

Year of the first commercial production deriving from the Development Area.

(c) The development investments shall be amortized over five (5) Years from

the start-up Year of the first production.

(d) The investments related to the exploitation phase shall be amortized

over five (5) Years from the date of their realization.

However, when the total production has reached the economic marginality as

defined in clause 13.7 hereinafter, the Parties shall consult each other in

order to reach a joint decision. This consultation will take place within

thirty (30) days from the date of receipt by the Minister of the written notice

by the Contractor.

13.3

Inasmuch as the Petroleum Costs recoverable during a given Year exceed

the value of the Crude of the Cost Recovery ("Cost-Oil") available this Year,

the recovery of the surplus shall be carried forward to the following Years.

34



13.4

The Contractor shall deduct on behalf of the Government from the total

production of the Crude extracted from the discovery area, after deduction of

the losses related to the Petroleum Operations, a portion equivalent to the

amount of the tax on oil production equal to 12.5% (twelve and a half percent)

for oil and 10% (ten per cent) for condensate. The remaining quantity of the

crude shall be referred to as "Available Crude".

13.5

The remainder of the Available Crude every year after deduction of the

recoverable Petroleum Costs, hereinafter called "Profit-Oil", shall be shared

between the Government and the Contractor, whether the Government shall exercise

or not its option of participation to the rights and obligations in accordance

with Article 12, according to the following progressive scale:

(A)



For



oil







AVERAGE DAILY PRODUCTION

GOVERNMENT SHARE

CONTRACTOR SHARE

- ------------------------- ----------------- ----------------(BARRELS/D)

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





0 to

5,000

50%

50%

5,001 to

10,000

55%

45%

10,001 to

20,000

60%

40%

20,001 to

50,000

65%

35%

50,001 to 100,000

70%

30%

Over 100,000

75%

25%



(b)



For



condensate







AVERAGE DAILY PRODUCTION

GOVERNMENT SHARE

CONTRACTOR SHARE

- ------------------------- ----------------- ----------------(BARRELS/D)

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







0 to 100,000

Over 100,000





50%

55%



50%

45%



13.6

With regard to the Seme Field produced on the H6 and H6.5 horizons, the

sharing determination of the Available Crude each year after deduction of the

Petroleum Costs in accordance with Article 13.2 shall be: 60% for the

Government and 40% for the Contractor.

13.7

The Parties

if Petroleum Costs

from the sale of

field, they shall

brought to the cost

field.



agree that if the Economic Limit of a field is reached (eg.

incurred by the Contractor exceed the cash flows deriving

the production so as to cause the early abandonment of this

consult each other in order to study the amendments to be

recovery plan for the purpose of extending the life of said

35





ARTICLE XIV

MEETING THE REQUIREMENTS OF

DOMESTIC CONSUMPTION

14.1

Three (3) years after the start up of the Production Operations, the

Government shall have the right to purchase and the Contractor shall be under an

obligation to sell, in a specific Delivery Point, a quantity of Hydrocarbons in

Crude form or an equivalent quantity of refined products or gas equivalent such

as agreed to between the parties equivalent at most to fifty percent (50%) of

the share of Profit-Oil to which the Contractor is entitled in order to meet the

domestic consumption of Benin. The assignment of Oil shall be made within this

framework in accordance with the provisions of Article 16.2.

If within a period not exceeding sixty (60) days from the date of delivery of

Hydrocarbons, the Government does not pay the invoice, the Contractor may obtain

payment by lifting from the Government Profit-Oil share.

14.2

With regard to Crude Oil, the Contractor's obligation to sell rests on

the principle according to which all producers of Crude Oil or exporter from

Benin, including the Government, bring part of their production, at any moment

and in a proportional manner, to meet the requirements of domestic consumption.

In order to take advantage of its acquisition right, the Minister must give a

three (3) months' written notice to the Contractor, indicating the quantity of

Crude Oil representing the Contractor's remuneration that shall be acquired

during the three (3) calendar months following the above mentioned notice. The

monthly variation of this quantity cannot exceed a range of more or less ten

percent (10%).

14.3

If due to a case of Force Majeure, other contractors or the Government

cannot proportionally contribute to the requirements of the domestic market, and

that, consequently, the volume of participation of the Contractor and of other

contractors to the sales of the domestic market must be increased, the

Contractor must sell the additional quantities required in accordance with the

above clauses and conditions until the case of force majeure has been resolved

and until the contribution intended to proportionally cover the requirement of

the domestic market has been re-established. This additional obligation does

not include the volumes of production which have been the subject of an

exportation contract for which the loading period has been fixed within forty

(40) working days following the date on which the Contractor has received

notification from the Minister as to the case of force majeure.

14.4

With regard to Natural Gas, the Contractor's obligation to sell must be

established taking into account the criteria used to meet the requirement of the

domestic market stipulated above, and taking into account the price of Natural

Gas determined in accordance with this Contract.



14.5

All payments made to the Government for the Contractor's Hydrocarbon

sales in accordance with the provisions of this Article must be made in dollars

and by bank transfer to the bank account designated by the Contractor outside

Benin, within a period of thirty (30) days from the date of delivery to the

Delivery Point of the Hydrocarbons acquired by the Government.

36



ARTICLE XV

APPLICABLE TAX SYSTEM

15.1

For the duration of the Contract and in accordance with the legislation

in force in the Republic of Benin, the Contractor shall be subject to the tax

system currently applied to companies in general, and to oil activities in

particular.

15.2

The Contractor shall be required to pay, under the conditions and the

due dates established by the Beninese tax legislation, all the taxes and duties

to which it is subject, in particular Income Tax equal to 55% (fifty-five

percent) of the taxable profit and the Export Revenue Tax at the rate of three

period twelve percent (3.12%) of the FOB value.

15.3

It is understood that in application of Article 15.2, the Minister

shall lift from the Profit-Oil share to which the Government is entitled under

Article 13.5 an amount corresponding to the Income Tax, and to the Export

Revenue Tax mentioned in the Petroleum Code. He shall pay said tax to the

institution designated for this purpose on behalf of the Contractor and shall

have delivered to the Contractor the receipts related thereto. The same applies

for the Export Revenue Tax. In this case, the Profit-Oil share to which the

Contractor is entitled under Article 13.5 shall be considered free of tax and

shall not be subject to any tax whatsoever. In other words, the Contractor

shall be released from any tax obligations which, by definition, are included in

the Profit-Oil received by the Government as well as in the Oil Production Tax

also received by the Government.

15.4

The Contractor and its subcontractors shall be exempt from the duties

and taxes on the equipment, exploitation material and engines imported by the

Contractor and its subcontractors within the framework of the Petroleum

Operations. These goods and equipment may be re-exported at the end of their

use according to the temporary admission system.

15.5



The



Contractor



and



its



subcontractors



(a) from the Value Added Tax (VAT) on the

the Petroleum Operations;



shall



activities



be



also



strictly



exempt:

related to



(b) from the Franchise Tax for a period of five (5) financial years;

(c) from the surface royalties mentioned in the Code; and

(d) for expatriate personnel, from contributions to the Social Security

Department of Benin (OBSS), from the employer's contribution (V.P), and from the

apprenticeship charge.

37



15.6

The expatriate personnel employed by the Contractor and its

subcontractors may import free of duties and taxes with the exception of the

road tax, their personal effects which shall be used during the first six (6)

months of their arrival. They shall also import a vehicle per household by way

of temporary admission.



15.7

The Government shall agree to take into consideration any modification

to the fiscal conditions which the Contractor may request at any time, provided

that:

other

and



(a) Such modification does not adversely affect all the financial gains and

benefits that the Government will derive from the Petroleum Operations;



(b) The only reason for proposing such modification shall be to permit any

person forming the Contractor or any other Affiliated Company to obtain in

another country a tax credit relating to the taxes paid in the Republic of

Benin.

15.8

The Contractor shall be required to pay to the State the income from

the taxes and duties mentioned in this Contract through a national structure.

The designation of the national structure in question shall occur within one

hundred and eighty (180) days following the Effective Date.

15.9

shall



Within thirty (30) days following the date of payment, the Government

issue, a receipt in the Contractor's name for said payment.

38





ARTICLE XVI

MEASURING, DISPOSAL, EVALUATION

AND SALE OF HYDROCARBONS

16.1

The Contractor must measure all the Crude Oil and Natural Gas produced

in the Contract Area according to the Good Practices of the Oil Industry. The

Contractor must keep full and accurate records of all the measures of

Hydrocarbons produced in the Contract Area after extraction of the water and of

its foreign substances, and of all the Hydrocarbons that may be marketed, which

will allow by difference to determine the quantities that have been used for the

Operations and the unavoidable losses. The Minister's representatives must have

access to these records and measures.

The Minister shall have the right to examine and to test all the measures,

measuring equipment, graphics and any other measuring or testing equipment and

information material.

If, at the end of an examination or test, it appears that measuring equipment

are not in working order, that they are damaged or badly adjusted, the

Contractor must put them in good working order or shall proceed with the

required adjustments immediately at its own cost.

If, within a reasonable period not exceeding thirty (30) days, the Contractor

does not assume this obligation, the Minister may take the necessary measures so

that said equipment be made operational or have the equipment adjusted and may

invoice to the Contractor the cost of this operation at the interest rate of the

Contract + 1%. If according to the Minister, the error caused by the bad

adjustment, or any other failure of a measuring equipment, appears to be at the

origin of a considerable difference in the production measuring, the Parties

shall consult each other for the purpose of examining the appropriate measures

to be taken. In the event of disagreement, the matter shall be submitted to an

expert so that the latter can determine if a retroactive adjustment of the

production figures should be made. If the Contractor deems it necessary to

replace measuring devices or instruments, it must notify the Minister for

approval and give to the Minister's representatives the opportunity to be

present during the operation and to take part thereto.

16.2

Under this Contract, the price of Crude Oil for each quarter shall be

the weighted average of the FOB prices received by the Contractor for sales to

third parties which are not related to the Parties during the corresponding



quarter.

If during a given quarter the Contractor does not sell at least forty percent

(40%) of the total production of Crude Oil of the Contract Area to third parties

which are not related to the Parties, the price of Crude Oil for that quarter

shall be the weighted average of the FOB prices established by comparison with

the Crude Oil Price on the international market taking into account the quality,

density and transportation differentials.

39



In the absence of an agreement between the Parties within fifteen (15) days

following the end of the Quarter concerned, pending the opinion of an Expert,

the sale price agreed to for the Quarter preceding the Quarter in question shall

apply temporarily subject to the retroactive adjustments which would be required

after expert evaluation. The expert evaluation requested under this article

shall occur within a period not exceeding thirty (30) days after the end of the

Quarter concerned.

16.3

Under this Contract, the price of Natural Gas sold on the domestic

market of Benin shall be the price received by the Contractor for sales to third

parties. Taking into account the fact that the gas market is not very developed

in Benin, the Minister must assist the Contractor inasmuch as possible in order

to find possible consumers for the Gas and to negotiate reasonable sale prices.

The Natural Gas price applicable to the Gas sold to a public Beninese company or

to a body whose capital with voting right is the direct or indirect property of

the State, shall be established by mutual agreement between the Parties, it

being understood that this price must reflect the commercial value of the energy

source that the Gas sold is deemed to replace, according to the modern

technology generally used and taking into account the cost of the gas produced.

The price that applies to the Natural Gas exports shall be the price received by

the Contractor for sales to third parties, subject to the same conditions

normally governing the sale of Crude.

16.4

The Contractor shall have the right to freely dispose, load, transport

and export the Hydrocarbons to which it is entitled under the Contract. The

Minister may request the Contractor to sell all or part of the oil to which the

State is entitled in accordance with Article 13 and under the market conditions

stipulated in Article 16.2, and provided that the Parties have agreed on the

provisions concerning marketing.

16.5

No later than sixty (60) days before the Start-up Date of the

Commercial Production in each Development Area, and thereafter at the beginning

of each Quarter, the Contractor must prepare and provide to the Minister a

projection indicating the total quantity of Hydrocarbons which, according to the

Contractor, shall be produced during the following four (4) Quarters in the

corresponding Development Area, from a production rate mutually agreed upon to

optimize the recovery of Hydrocarbons in the Development Area according to the

Good Practices of the Oil Industry. Each Quarter, the Contractor shall make

reasonable efforts to produce the quantity of Hydrocarbons estimated to be

produced by it. The Contractor shall be authorized to use, free of charge, the

quantities of Hydrocarbons produced in the Contract Area, in their natural or

processed state, required for the carrying out of the Petroleum Operations

(including the Operations of Gas loading) according to the Good Practices of the

Oil Industry. Whatever the quantity of hydrocarbons used for this purpose, it

shall not be considered as being part of the Commercial Production.

40



ARTICLE XVII

NATURAL GAS



17.1

Benin's domestic market shall benefit from a preferential right for the

acquisition of the Natural Gas produced in any Development Area and which is

not required for the Petroleum Operations in accordance with this Article,

provided that the commercial proposals made are as favourable as those under

which the gas in question may be exported. The Natural Gas not sold on the

domestic market may be exported.

In the event of discovery of a commercial accumulation of gas, a gas purchase

contract ("Take or Pay" contract) shall be discussed between the Government and

the Contractor as soon as possible. If the direct generation of electricity

would appear more favourable for the two Parties, the latter shall meet to

determine the conditions thereof.

17.2



ASSOCIATED



NATURAL



GAS



17.2.1

If a Crude Oil Discovery occurs that the Contractor shall consider to

be commercially viable under this Contract and this discovery contains

Associated Gas, the Contractor must indicate in its evaluation report if it

anticipates that the estimated production of Associated Gas shall exceed the

quantities of Associated Gas required for the Crude Oil Production Operations

(this surplus shall be referred to hereinafter as "surplus Associated Gas") and

if the surplus Associated Gas can be produced in commercial quantities. If the

Contractor declares that this Associated Gas exists and that it can be produced

in commercial quantities, it shall indicate in the General Development Program

prepared for the Hydrocarbon Discovery, the details relating to the gathering,

processing, compression and transportation facilities required for the

exploitation of the surplus Associated Gas for commercial purposes, as well as

the corresponding costs.

17.2.2

Within ninety (90) days following the date of submission of the

General Development Program, the Minister shall advise the Contractor whether he

himself or any other public entity in Benin designated by him, wishes to dispose

of the surplus Associated Gas on the domestic market.

17.2.3

If, in accordance with this article, the Minister advises that he

wishes to dispose of the surplus Associated Gas on the domestic market, the

Contractor may, by notice within ninety (90) days following the date of

notification of the Minister, participate in the costs of the facilities

required for the production of the surplus Associated Gas and the proceeds

deriving from the sale of said Gas.

17.2.4

If the Contractor decides to participate in accordance with the above

provisions:

(a) It shall build gathering, processing, compression, transportation and

storage facilities required for the production and the delivery to the Delivery

Point of the surplus Associated Gas in accordance with the specifications of the

General Development Program;

41



(b) The price of the Associated Natural

determined in accordance with this Contract.



Gas is the price of Natural



Gas



17.2.5

If the Contractor decides not to participate, it shall deliver to the

Minister, or to the public Beninese company designated by the Minister for this

purpose, to a Delivery Point designated as "EXIT", and at its expense which

shall be included in the recoverable costs, all the quantities of surplus

Associated Gas produced.

17.2.6

Subject to the provisions relating to the protection of the

environment, the Contractor may burn any surplus Associated Gas that has not

been used.



17.3



NON-ASSOCIATED



GAS



17.3.1

If a Discovery of Non-Associated Gas occurs in the Contract Area, the

Contractor must submit a report in accordance with the provisions of this

Contract. If the Contractor deems that the Discovery is worth being evaluated,

it must prepare an evaluation, with a reserve estimate, of the production

potential, the development costs and the production costs as well as of the

economic viability. In this report, the Contractor must also declare if the

Discovery is commercially viable. If the Contractor deems that the Discovery of

Non-Associated Gas is not worth being evaluated, the provisions relating to

Crude Oil shall apply mutatis mutandis.

17.3.2

If the Contractor deems that the Discovery can be commercially

viable, the Minister shall assist it in the evaluation of the gas requirement on

the domestic market as well as in the transformation and marketing activities

required for its distribution to the consumers of said market. In the same way,

the Contractor shall be at liberty to evaluate the viability of the Gas

exportation. During the calendar year following the date of submission of the

detailed evaluation report of the Contractor, the Parties must meet in order to

determine if the sale points and other pertinent factors justify its development

and production for sale on the domestic market and/or if it is considered that

this market is not big enough and therefore the Gas must be exported.

17.3.3

If the Contractor deems that the development of the Discovery of the

Non-Associated Gas is justified, it must submit to the Minister a General

Development Program for said Discovery and the provisions relating to the

commercial discovery and those relating to the Government participation shall

apply to the development and production of said Gas as if it concerned Crude

Oil. If the Contractor deems that the development of the Discovery of

Non-Associated Gas is not justified, the provisions relating to the Crude Oil

shall then apply mutatis mutandis to the development and production of said Gas.

42



17.3.4

If it has been determined that the Discovery of Non-Associated Gas

cannot be used on the domestic market while the Contractor considers that said

Discovery of Non-Associated Gas may be commercially viable for exportation, the

Contractor shall then have full freedom to develop the Gas Deposit provided that

it submits to the Minister a General Development Program. If the Contractor

begins the Development Operations for exportation, the Minister shall take the

necessary measures to facilitate the construction of the appropriate facilities.

The provisions relating to the commercial Discovery and to the Government

participation shall apply mutatis mutandis to the development and production of

said Non-Associated Gas as if it concerned Crude Oil. Once the Contractor has

started up the Development Operations for exportation, the right granted to the

Contractor for exportation under this Article shall remain in effect during the

period of the Contract unless the two Parties change the procedures by mutual

agreement.

17.3.5

Under this Contract, the price of the Non-Associated Gas produced by

a Gas Deposit intended to be used in Benin shall correspond to the price of

Natural Gas determined in accordance with the provisions of this Contract.

17.3.6

In compliance with the safety and environment protection standards,

the Contractor shall have the right following the Minister's approval, to build

facilities for the separation of gas for the purpose of producing liquid gas and

condensate.

43



ARTICLE XVIII



DAMAGES, ENVIRONMENT PROTECTION

AND SAFETY

18.1

The Contractor shall be responsible for all damages and injuries that

may be caused as a result of its operations to individuals or to the State. The

Contractor shall be required to safeguard the Government against any damage for

which it may be responsible as a result of its activities under the Contract or

of any operation or activity deriving therefrom. To that end, the Contractor

must, at any time, release the Government from any responsibility against any

claim and obligation resulting from death, accidents or damages caused by its

activities, including those carried out under the Contract, or non-compliance by

the Contractor with the laws and regulations in force in Benin. This Contract

shall not have any effect on the rights claimed by third parties against the

Contractor under the laws in force in Benin.

18.2

The Parties acknowledge that, due to their nature, the Petroleum

Operations may produce an ecological imbalance in the Contract Area as a result

of environment pollution. Consequently, during the performance of the Contract,

the Contractor must adopt the necessary measures in order to prevent or to

reduce to a minimum the pollution of the ground, atmosphere and water, and

ensure that this pollution does not harm the plants and the wildlife and, in

general, prevent everything that could materially harm the environment. If the

Contractor cannot prevent the pollution of the environment, it must take the

necessary measures to reduce to a minimum the effects thereof according to the

international standards. These measures must be notified to the Minister for

approval.

18.3

In order to reduce to a minimum or

Contractor must use adequate technical means,



eliminate the pollution, the

approved by the Minister.



18.4

The government is responsible for damages caused to third parties as a

result of environmental pollution resulting from Petroleum Operations conducted

before the end of the Transitional Period. In accordance with the Code, the

Contractor shall be responsible for damages caused to third parties as a result

of the pollution of the environment.

18.5

The Contractor shall undertake to call on experts in this regard in

order to examine the probable impact of the Petroleum Operations on the

environment. This study must include:

(a) the state of the environment and the level of pollution existing in the

Contract Area and in the neighbouring areas before the petroleum operations;

(b) the impact that the Petroleum Operations may have on the environment.

The

1)

the



study



indicated



in



paragraph



(a) must be carried out in two steps:



a preliminary study delivered by the Contractor to the Minister before

seismic survey of the Contract Area and



44



2)

the final study applicable to all the exploration period and which shall

be submitted to the Minister before the drilling of the first well. The study

indicated in paragraph (b) must be carried out and delivered to the Minister at

least ninety (90) days prior to the drilling of said well.

18.6

The studies listed above must include the procedures used for the

elimination or reduction to a minimum, inter alia, of the wastes mentioned below

as well as the way to neutralize same:

(a) Drilling muds and Hydrocarbons

workover and abandonment of the wells;



resulting from the tests,



completion,



(b) Polluted underground layers;

(c) Solvents, lubricants and other products used during the operations;

(d) Organic

areas.



waste,



detritus and unusable



products from the work and camp



18.7

The Contractor must design and build its facilities endeavouring to

reduce to a minimum the pollution of the environment and it must, inter alia,

adopt the following procedures on the drilling sites and the location site of

the exploitation equipment:

(a) Drainage/recovery system of Crude Oil spillage,

as well as polluted waters;



and other derivatives



(b) Waste recovery system.

18.8

The Contractor shall undertake to include the provisions of this

Article in all the contracts negotiated with third parties and related to the

Petroleum Operations.

18.9

If the Contractor does not comply with the provisions of this Article

and a spillage of Crude Oil or of any other product occurs in the soil, the sea

bottom or in the sea, or if the Contractor's activities cause another form of

pollution or, damage the water springs or the animal or plant life in any other

manner, the Contractor must take immediately all steps according to the Good

Practices of the Oil Industry in order to control the pollution, clean any

spillage of Crude Oil or of any other product, or repair as much as possible any

damage caused.

18.10

If, as a result of the direct effect of a gross or deliberate

negligence on the part of the Contractor, a spillage or an act of pollution

occurs, the cost of the control, cleaning and repair operations shall be borne

by the Contractor and shall not be considered Petroleum Costs under this

Contract.

18.11

In the event of danger which may affect the environment, the

Contractor must immediately notify same to the Minister and take the measures

prescribed in the emergency procedures adopted by the Parties according to the

Good Practices of the Oil Industry.

45



18.12

At the end of the Contract, in any other situation than the

abandonment case, the Contractor must take the measures according to the Good

Practices of the Oil Industry to restore the environment and the sites where the

Petroleum Operations have been performed to their original state on the

Effective Date of the Contract, taking into account the rules of the abandonment

procedure.

At the time of submitting the General Development Program, the Contractor must

submit to the Minister for review and approval a schematic summary of the

restoration activities of the environment once the Petroleum Operations have

ended, indicating the manner in which the corresponding costs shall be financed

using a special account for the specific purpose of financing the obligations

concerning the restoration of the environment and the abandonment procedure.

Thereafter and at the same time as the Work Program and the Budgets, such

schematic summary shall be submitted to the Minister for review and approval.

18.13

The Contractor must take the necessary steps according to the Good

Practices of the Oil Industry, to carry through the activities mentioned in the

contract in all safety, and must comply with the laws and regulations of Benin,

including the regulations in force with regard to the work, environment

protection, health and safety. The Contractor must refrain from any action



endangering



the



health



or



the



safety



of



the



persons.



18.14

The Minister shall have the right to inspect all the sites, buildings

and facilities in the Contract Area. In order to have access to these sites,

the Minister must first inform the Contractor.

18.15

water



and



The Contractor

residual oil



must ensure the sure and effective treatment of the

and the plugging of the wells before abandoning same.



18.16

The Contractor shall cement and abandon all producing wells following

the current oil practices immediately after stopping their production inside

Block 1 or the Seme Field.

However, the expenses relating to the abandonment of the Seme field and

facilities shall not be borne by the Contractor except the wells worked over or

drilled to reach the deep zones.

18.17

The Contractor shall remove and clear according to the abandonment

procedure appearing as an Appendix all the platforms installed by it in the

Contract Area.

18.18

The Contractor shall remove and clear the existing platforms and the

monopod facilities after the expiration of the Contract or after the suspension

of the production of Block 1 and/or of the Seme field. The removal, clearing,

or abandonment of the facilities set up by the Contractor shall take place

according to the standards of the oil industry generally accepted in the Gulf of

Mexico. On the other hand, the facilities underwater or others shall be left in

such a state so as not to present an obstacle to ships.

18.19

The Contractor shall leave all pipelines and facilities free of oil at

the expiration of the Contract according to the current oil practices.

46



18.20

The Government explicitly agrees that the Contractor shall not have

any responsibility with regard to abandonment or restoration of the environment

other than that expressly stipulated herein.

18.21

agreed



Any change

upon by the



to this agreement with regard to the abandonment must be

two Parties.



18.22

If laws or regulations relating to the environment in force on the

date of signature of the Contract are amended so as to substantially modify the

economic equilibrium of the Contract, the Parties shall refer to the provisions

of Article 29.2.

47



ARTICLE XIX

PROVISIONS REGARDING CHANGE

19.

Under the regulations in force in Benin, the Ministry shall guarantee

that for the duration of the Contract, the Contractor and the non-Beninese

subcontractors shall be authorized to:

(a) pay in foreign currency, in full or in part, the salaries,

other indemnities;

(b) open, keep and use bank accounts in

abroad and accounts in local currency in Benin;



foreign



currency



refunds and

in Benin and



(c) directly pay abroad, in foreign currency, to foreign subcontractors for



the acquisition

Operations;



of equipment



and supply of services



related to the Petroleum



(d) receive, transfer and keep abroad and freely dispose of all the funds

including, inter alia, all the payments received for the exportation of

Hydrocarbons and any payment received from the Government;

(e) obtain from abroad all the loans required for the Petroleum Operations;

(f) buy the local currencies required for the Petroleum Operations and

convert in foreign currency all local currencies in excess of the immediate

domestic needs in accredited banks of exchange bureaus;

(g) transfer abroad all foreign currencies in excess of the local

requirements of the Contractor. The rights given to the Contractor and

Subcontractors under this Article shall also apply to expatriate employees.

48



ARTICLE XX

EMPLOYMENT AND TRAINING

20.1



EMPLOYMENT



In compliance with the labour legislation in Benin, the Contractor shall be at

liberty to hire the personnel and the Subcontractors required to carry through

the Petroleum Operations in accordance with the Contract.

However, with regard to the recruitment of employees and to the extent where

this is in accordance with an efficient and responsible exploitation of the

Petroleum Operations, the Contractor must give preference to citizens of Benin

qualified, through their training and experience, to exercise the duties in

question. With regard to the selection of Subcontractors for the performance of

the Petroleum Operations, the Contractor must give preference to Beninese

Subcontractors to the extent where the latter are competitive with regard to

quality, costs and technical expertise to keep the established schedules of

activities.

20.2



TRAINING



The Contractor shall undertake to offer adequate training to the Beninese

citizens employed for the Petroleum Operations during the validity of the

Contract.

To that end, within three (3) months following the Effective Date, a training

program relating to the Exploration period for an annual amount of fifty

thousand US dollars (US$50,000) at least shall be established and submitted by

the Contractor to the Minister. Within thirty (30) days following the start-up

of the Commercial Production, the Contractor shall also submit to the Minister a

training program relating to the Exploitation period for an annual amount of at

least one hundred thousand US dollars (US$100,000).

20.3



SEME



OIL



PROJECT



PERSONNEL



(PPS)



Within the framework of the redevelopment of Seme and of the exploration of

Block 1 around Seme, the Parties have agreed to take advantage of the

Transitional Period to jointly decide whether to use all or part of the PPS

personnel.

49



ARTICLE XXI



ACCOUNTING

21.1

The Contractor must keep its accounting as well as any financial

information, books and registers concerning the Petroleum Operations, in

national currency and in the form required by the law in force in Benin.

21.2

those



The accounting procedures to be applied by the Contractor shall be

established in the Accounting Appendix D.



21.3

The audited accounts of the

Minister for approval no later than

Calendar Year.



Contractor must be submitted to the

three (3) months after the end of the



21.4

The Minister may, by submitting notice to the Contractor, no later than

six (6) months following the date of submission of the financial accounts,

submit all financial accounts of the Contractor relating to the Calendar Year in

question to the auditing of an International Company of Chartered Accountants,

appointed by agreement between the Parties.

The cost of this auditing shall be

borne by the Government.

21.5

Unless the Parties find a solution by mutual agreement, the Minister

may submit any objection regarding the Contractor's accounts to an expert

decision. Before giving a decision in connection with the objection submitted,

the expert must take into account the results of the financial auditing made

according to the provisions of this Article. If the Minister's objection is not

submitted to an expert within twelve (12) months following the receipt by him of

the accounts, the objection in question shall be null. If the Minister's

objection is validated by the Expert, the Contractor must correct the accounts

in question and bear the costs related to the auditing and the expert evaluation

notwithstanding the above provisions.

50



ARTICLE XXII

CONFIDENTIAL NATURE OF THE DATA

22.1

All the reports, data and information obtained or prepared by the

Contractor, to the extent where they relate to all or part of the Contract Area

shall be the full property of the Beninese State and shall be treated

confidentially. Each Party undertakes not to divulge same except after the

prior approval of the other Party, to:

(a) An Affiliated company or a subcontractor of the Contractor;

(b) A financial institution for the purpose of obtaining a loan;

(c) A stock exchange;

(d) Any potential assignee in application of Article 23.

This clause shall not prevent the Minister from communicating certain

information to any government entity and to any trustworthy person interested in

securing a right of exploration and exploitation for Hydrocarbons in Benin.

22.2

All reports, data and information communicated by the Minister or the

Contractor to a third party in accordance with the above provisions, shall be

made according to agreements the terms of which shall guarantee that these data,

information or reports are treated by the recipient as strictly confidential.

22.3

The reports, data and information relating the Contract Area and

considered as important by the Minister for the execution by a third party of an

exploration program in a bordering area, shall be communicated to it by the



Minister. In exchange, the Contractor shall have access to the data,

information and reports obtained by said third party concerning a bordering area

of a comparable exploratory nature. The confidentiality clauses shall apply to

this third party.

22.4

All the reports, data and information, including the interpretations

and evaluations relating to any area that no longer forms part of the Contract

Area following retrocession of an area or expiration of this Contract, shall be

treated by the Contractor as strictly confidential for a period of five (5)

years from the date on which said area has ceased to form an integral part of

the Contract Area or from the date of expiration of this Contract.

22.5

Any failure to comply with the confidentiality Clauses mentioned in

this Article shall be reproved according to the regulations in force in Benin

regarding the divulging of professional secrets.

22.6

Any press publication initiated by the Contractor and relating to the

results of the operations conducted under this Contract shall be subject to the

prior authorization of the Minister.

51



ARTICLE XXIII

ASSIGNMENT OF RIGHTS

23.1

The Parties may assign all or part of their rights and obligations

deriving from this Contract. If the Contractor intends to assign or transfer

its rights totally or partially, in accordance with the Contract, it must

immediately submit to the Minister a written authorization request, unless the

transfer is to an Affiliate in which case it must notify the Minister in writing

of its intention to transfer sixty (60) days prior to the effective date, or at

a later date agreed to with the Minister, following which the transfer shall be

effective without the need for an authorization from the Minister. Any request

must indicate the name, the address and any appropriate information on the

technical and financial capabilities of the assignee. Within thirty (30) days

following the receipt of the request, the Minister must decide whether he

approves or not the proposed assignment. Any disagreement by the Minister must

be based on reasonable causes related to the technical and financial

capabilities of the proposed assignee.

23.2

If one of the Parties makes a partial assignment of its rights and

obligations deriving from this Contract, the assignee shall be responsible,

jointly and severally, for the guarantees, responsibilities and obligations of

the assignor. If the assignment is total, the assignee shall be solely

responsible for said obligations and guarantees. Any assignee must adhere to

the bank guarantees and supply a guarantee from its parent company, if

applicable, as required by this Contract.

52



ARTICLE XXIV

FORCE MAJEURE

24.1

The Parties shall not be responsible in the event of failure or delay

in the fulfillment of their obligations resulting from this Contract provided

this failure or delay is due to a case of Force Majeure.

24.2

A case of Force Majeure shall mean any act or event which does not fall

within the reasonable limits of control of the Parties, and which prevent them

indefinitely or temporarily from fulfilling their obligations under the

Contract. Thus, the Force Majeure shall include the cases listed below, without

this list being limitative: war or similar situations, embargoes, blockades,

earthquakes, floods, fire, strike or lock-out, terrorism act, riots, government

action.



24.3



The



Party



invoking



the



case



of



a) Advise the other Party as early as

by registered letter with acknowledgment

detail;

b) Take as far as possible all

eliminate the cause of Force Majeure;



Force



Majeure



shall:



possible by any means and confirmed

of receipt describing the event in



appropriate



and



legal



provisions



to



c) Inform the other Party in the manner indicated above as soon as the

Force Majeure has been eliminated and resume the execution of its contractual

obligations.

24.4

If the case of Force Majeure lasts for more than three (3) months, the

Parties to the Contract shall meet in order to determine the appropriate action

to be taken.

24.5

It has been agreed that if for reasons of Force Majeure, a Party is

unable to fulfill an obligation or to exercise a right under the Contract, the

period granted to fulfill the obligation or to exercise the right, including any

subsequent obligations or rights, shall then be extended by a period equal to

the duration of the Force Majeure.

53



ARTICLE XXV

ARBITRATION AND EXPERT EVALUATION

25.1



ARBITRATION



25.1.1

Subject to the provisions hereunder relating to expert evaluation,

any dispute or claim related to a matter or operation falling within the

Contract or connected therewith, including, inter alia, any dispute or claim

relating to its validity, interpretation, execution or omission of obligations

which it claims cannot be amicably settled between the Parties, must be finally

and exclusively settled by arbitration at the initiative of one or the other

Party.

25.1.2

The arbitration procedure shall be implemented by three (3)

arbitrators in accordance with the rules of conciliation and arbitration of the

International Centre for the Settlement of Investments Disputes (CIRDI) of the

World Bank Group.

25.1.3

Unless the Parties otherwise mutually agree in writing, the third

arbitrator appointed as indicated above must not be a citizen of Benin or a

person of the same nationality as the Contractor.

25.1.4



For



any



arbitration



procedure



in



accordance



(a) The procedure must take place in Paris,

otherwise mutually agree;



France,



with



this Article:



unless the



Parties



(b) The French language shall be the official language in all respects; and

(c) The

arbitrators.



parties



shall be bound by the



decision



of the



majority



of the



25.1.5

If an arbitration procedure has been instituted, the Parties shall

continue to fulfill their obligations under the Contract unless this has been

made impossible due to the case of Force Majeure.

25.1.6



The



cost of the arbitration procedure must be borne according to the



methods



defined



by



the



arbitration



tribunal.



25.1.7

Under this Article, the Parties shall waive any jurisdiction

immunity. For the execution of the judgments rendered by the arbitration

tribunal of CIRDI, the Parties shall waive the execution immunity with respect

to their property. The seizure and adjudication of property to which this

immunity may give rise include, with regard to the Government, only those

accounts, income and property related to the Hydrocarbon field in the Contract

Area.

25.2



EXPERT



EVALUATION



54



25.2.1

Any Party wishing to submit a matter to the decision of an expert in

accordance with a provision of the Contract which provides for this procedure

including, the Accounting Appendix, or any other matter that the Parties decide

to submit by joint agreement to the decision of an expert under this Article,

must notify same to the other Party. This notification must include a list of

at least three (3) proposed experts. The other Party must reply to this

notification within thirty (30) days following the date of receipt either by

accepting one (1) of the experts proposed or by proposing at least three (3)

other experts. In the latter case, the Party who has presented the initial

notification shall have thirty (30) days to accept one (1) expert or reject all

the experts proposed by the other Party. Non-notification shall constitute a

rejection of the experts proposed.

25.2.2

If the Parties do not reach an agreement with regard to the selection

of an expert within sixty (60) days following the date of the first notification

under the above paragraph, any of the Parties may request the Centre of

technical experts of the International Chamber of Commerce (CCI), whose head

office is in Paris, to appoint an expert in accordance with its rules.

25.2.3

If the expert agreed to by the Parties or appointed in accordance

with the above provisions refuses the Parties' request, dies or, for any other

reason, is unable to act as an expert, the Parties must meet immediately in

order to appoint an expert in replacement. If the Parties cannot reach an

agreement within thirty (30) days following the date on which it has been

established that the first expert could not act, any of the Parties may request

the Centre of technical experts of the CCI to appoint another expert in

accordance with its rules.

25.2.4

The Parties shall be required to cooperate with the expert inasmuch

as possible and each Party must ensure the cooperation of its Affiliates. The

Parties must ensure access to the data and information which the Parties or

their Affiliates may provide and which, in the expert's opinion, may contribute

to his decision. The Parties' representatives shall have the right to consult

the expert and to provide him with written information but the expert can impose

reasonable limits to this right. He shall be at liberty to assess to what

extent any document and information submitted for his review is duly justified

or pertinent.

25.2.5

shall be



All costs related to the selection and utilization of the expert

jointly and equally paid by the Parties.



25.2.6

Any decision rendered by the expert in accordance with this Article

under a provision of the Contract which expressly provides for this procedure

shall be final and enforceable for the Parties. No Party may submit the matter

which was the subject of an expert decision to an arbitration procedure such as

provided in this Contract. By joint decision of the Parties, the matters

submitted to the decision of an expert may be subject to a final and definite

decision through arbitration, if the Parties agree to accept it at the time a

decision was made to submit the matter to an expert.



55



ARTICLE XXVI

TERMINATION

26.1

In case of non-compliance by the Contractor with the provisions of this

Contract, the Minister may terminate the Contract if the Contractor does not

rectify same.

26.2

If the Minister deems that the Contractor has not complied with the

provisions of the Contract and has thus given rise to a reason for termination,

he must notify the Contractor in writing by formal notice so that the latter may

rectify the situation within sixty (60) days following the receipt of the

notice, if the situation can be rectified. If, within this period, the

Contractor has not rectified the situation, the Minister may declare the

Contract terminated and claim any damages deriving from said failure.

26.3

During the exploitation period, the Contractor may terminate the

Contract, by written notification to the Minister at least sixty (60) days prior

to the date of termination, provided that the Contractor has fulfilled all its

contractual and tax obligations, as well as its obligations related to the

corresponding annual Work Program.

26.4

The Contract shall be automatically terminated by the Minister through

notice to the Contractor when the latter has committed a gross mistake,

resulting from a deliberate negligence, has issued false declarations in writing

when the Contractor should have known that they were false, has assigned any

interest whatsoever to a third party without complying with the provisions

relating to the assignment of rights or when it has been declared bankrupt by a

competent court.

26.5

The Contract may be automatically terminated by the Minister through

written notification to the Contractor in the following cases if within sixty

(60) days following the date of receipt of a notification the Contractor has not

taken the corrective measures:

a) when the Contractor does not abide by the minimum work obligations;

b) when it does not complete an evaluation or a work program;

c) when it does not execute the provisions of an

decision of an expert.



arbitration



award or the



26.6

If the Contract has been terminated in accordance with this Article,

the Contractor shall have the right to withdraw and export all the goods used by

it, for which the property title has not been transferred, in part or in full,

provided it settles all its debts toward the Government. The Contractor shall

lose any other right under the Contract. It shall not be released from any of

the obligations contracted before the effective date of termination, whether

they are the result of said termination or the object thereof.

56



26.7

If the Contractor challenges any of the events mentioned in this

Article or maintains that one of these events has occurred but it has rectified

same, the Contractor may refer the matter to an arbitration procedure within

thirty (30) days following the date of receipt of the termination notice from

the Minister. The recourse shall not be suspensive of the termination.

26.8

must

Good



Before leaving the Contract Area following termination, the Contractor

ensure that all wells are left in good condition in accordance with the

Practices of the Oil Industry.



26.9

Termination of the Contract shall occur notwithstanding any other right

which may have been established in favour of the Parties, under the Contract,

before said termination.

57



ARTICLE XXVII

BANK GUARANTEE

27.1

In order to ensure the good performance of the minimum work obligations

provided in this Contract, the Contractor must submit within ninety (90) days

following the Effective Date, an irrevocable bank guarantee in accordance with

the sample in Appendix C for an amount that is sufficient to finalize the work

obligations during the initial phase of the exploration period. Within

forty-five (45) days before the beginning of each extension phases of the

exploration period of the Contract, the Contractor must submit an irrevocable

bank guarantee for an amount that is sufficient to finalize the work obligations

for the phase considered.

Non-submission of the bank guarantee within the period required shall constitute

a failure to the provisions of the Contract and shall lead de facto to its

termination by the Minister in accordance with the provisions relating to

termination.

27.2

The sum due in accordance with the bank guarantee mentioned above shall

be progressively reduced as soon as the minimum work obligations for the year

concerned have been finalized. For the purpose of this reduction, the

Contractor may, at any time, submit for the Minister's approval a declaration

establishing the level of performance of the work obligations. This approval

shall take place within reasonable periods.

27.3

In order to render the above mentioned reduction effective, the

Minister must notify its approval to the bank issuing the bank guarantee within

a period of thirty (30) days from the date of receipt of the Contractor's

request.

27.4

If the Contractor considers that the Minister's approval mentioned

above has been unduly delayed or if the Minister deems that the Contractor has

not satisfactorily executed a minimum work obligation according to the Good

Practices of the Oil Industry, any of the Parties may submit the matter to the

decision of an expert.

27.5

The guarantees to be submitted by the Contractor under this Article

must be approved by the Minister. The Contractor shall forward to the Minister

the original guarantees to enable him to review and keep them.

58



ARTICLE XXVIII

NOTIFICATION

28.1

In order to be considered valid, any communication or notification

relating to the Contract must be submitted on a working day or received by

registered letter, cable, telex or fax to the addressees at the following

addresses:

THE



GOVERNMENT:



represented

THE



MINISTER



by

OF



MINES,



ENERGY



AND



HYDRAULICS



04



Boite



Cotonou



Postale:

(R



publique



Fax



(229)



THE



CONTRACTOR



ADDAX

c/o



Addax

rue



CH



1202



Fax:



T



B



nin)



lex:



BENIN



Management



du



5237



MINERH



LIMITED

Services



SA



Valais



Gen



00



du



31.35.46



PETROLEUM



9,



1412



ve



41



22



Suisse

741



50



20



and

ABACAN

c/o



RESOURCE



Abacan



1750



-



Calgary,

Fax:



001



(BENIN)



Resource



800



5th



Alberta

403



269



LTD.



Corp.



Avenue

T2P



3T6



SW

Canada



3944



28.2

The Parties shall have the right to change address for the purpose of

notification and communication by notifying same in writing to the other Party

at least five (5) days before the date of actual change.

59



ARTICLE XXIX

APPLICABLE LEGISLATION, STABILIZATION

AND COMPENSATION

29.1

laws



and



This Contract shall be governed and interpreted in accordance with the

regulations in force in the Republic of Benin.



29.2

If the laws or regulations of Benin in force on the date of signature

and applicable for the execution or the interpretation of the Contract or to the

economic rights of the Parties are amended so as to substantially modify the

economic equilibrium existing between the Parties on the date of signature, the

latter must meet to discuss any additional agreement which, by mutual agreement,

would reestablish said equilibrium. Any additional agreement jointly adopted by

the Parties must take into account the most probable technical and commercial

parameters in case of future development of the Hydrocarbons. If the parties

cannot agree on the parameters to be used for these calculations, or on the

additional agreements which would reestablish the economic equilibrium existing

on the date of signature, the dispute or disputes must be submitted to the

decision of an expert.

If no appropriate rules exist concerning the dispute, the contract or related

thereto in the Code or in the regulations in force in Benin, the customs and

practices of the international oil industry and the principles of law applicable



in



this



regard



in



the



oil



countries



shall



be



used.



29.3

The parties agree that the Government will assume the responsibility

for the consequences of contractual commitments, legal and financial concerning

third parties, as well as all suits and damages until the end of the

Transitional Period. The Contractor will be held harmless from any operations

and activities on Seme or Block 1 which took place before the end of the

Transitional Period.

60



ARTICLE XXX

INFRASTRUCTURE

30.1

The Government shall facilitate to the Contractor, for the performance

of the Petroleum Operations, the use of any roads, storage tanks and other

structures for storage and processing, piers and other loading and shipment

structures, railway lines, pipelines and other transportation infrastructures

existing in Benin and which are not exclusively used for other activities

including other petroleum activities.

30.2

The Contractor shall pay passage rights and other reasonable dues for

the use of such infrastructures in accordance with the regulations in force in

Benin. The costs incurred within this framework shall be considered as

Petroleum Costs and may be recovered by the Contractor but must not exceed those

paid by the public in general or by other parties in the same situation as the

Contractor.

61



ARTICLE XXXI

GUARANTEE OF PARENT COMPANIES

31.

The Contractor undertakes to produce on the Effective Date of the

Contract a letter from the parent companies guaranteeing the performance of the

ADDAX PETROLEUM-ABACAN Benin Consortium with regard to all the obligations

described or mentioned in the Contract.

62



ARTICLE XXXII

TRANSITIONAL PERIOD

The Transitional Period is a period

Government and the Contractor.



for the transfer of powers between the



The Parties agree that the Transitional Period is required to enable the

accounting and technical audits, in particular, for the certification of the

facilities.

This

date

During

32.1



Transitional Period shall be for a maximum of three (3) months from the

of signature of the Contract.

the



Transitional



JOINT



Period,



the following obligations shall be observed:



OBLIGATIONS



32.1.1

The Parties undertake to evaluate the assets of the Seme Oil Project

(PPS) and to proceed if necessary with their distribution between the Government



and



the



Contractor,



and



to



the



sharing



of



responsibilities.



32.1.2

The Parties also undertake to discuss the geological, technical and

financial position of the Seme Field in order to determine the economic

conditions thereof, and their impact on the operations in Block 1.

32.2



GOVERNMENT



32.2.1

is the



The

owner



OBLIGATIONS



AND



RIGHTS



Government shall retain the full ownership of the facilities and

of all the oil production.



32.2

After the Transitional Period, a percentage of the oil production shall

be allocated to the Contractor to cover the Petroleum Costs incurred by it

before the end of the transfer of powers in accordance with the contractual

provisions relating to production sharing in Seme.

32.3



CONTRACTOR'S



OBLIGATIONS



32.3.1

The Contractor undertakes, after carrying out the geological,

geophysical, reservoir engineering and production technology studies to submit

to the government an Action Program to produce the H6 and H6.5 reservoirs or

other reservoirs in Block 1. This program may cover the reprocessing of seismic

lines, the drilling of new wells as well as the well workovers, temporary or

final shutdown.

33.3.2

The Contractor undertakes to submit to the Government a report on

the condition of the facilities together with a program for their remediation

and their management on their temporary or final shutdown. In the case of

remediation he undertakes to make the investments to the Good Practices of the

Oil Industry, and taking into account the future production of Seme and Block 1.

63



ARTICLE XXXIII

FINAL PROVISIONS

33.1

If on one or several occasions, the Minister or the Contractor omits to

invoke or to emphasize the execution of one of the provisions of the Contract,

the latter must not be interpreted as a renunciation to the future application

of the provision or of the right in question.

33.2

All matters which are not expressly provided for in this Contract shall

be governed by the Code and other laws and regulations of the Republic of Benin.

33.3

If a provision of the Contract is declared null or non-invocable for

any reason whatsoever, this does not imply that the Contract or any other of its

provisions may be declared null or non-invocable, except if the Contract or

these other provisions are affected by this nullity.

33.4

The Contract may not be amended without the unequivocal and written

consent of the Parties, but the Minister may, however, extend the period during

which the Contractor must fulfill any obligation under this Contract and each

Party, or both Parties together, may freely exercise, implicitly or explicitly,

any rights granted to them hereunder.

33.5

reading



The

and



purpose of the headings used in the Contract is to facilitate its

cannot be interpreted as having a special meaning.



33.6



Any



reference to the singular shall include the plural and vice versa.



33.7

Any reference to the masculine gender shall include the feminine gender

and vice versa.



33.8

The Contract shall constitute the full agreement of the Parties and

shall replace any agreements and negotiation results conducted between the

Parties before the date of signature.

33.9

in the

33.10



Once the Contract has been signed by the Parties, it shall be published

Official Gazette of the Republic of Benin and anywhere else required.

This



Contract



has



been



signed



in



two



(2)



originals.



FOR



THE



64



MADE IN



FOR

OF



THE

THE



COTONOU,



THE



01/02



1997



CONTRACTOR



GOVERNMENT

REPUBLIC



OF



BENIN



MR. EMMANUEL GOLOU

- -------------------MINISTER OF MINES, ENERGY



AND



HYDRAULICS



MR. MARC LORENCEAU

-------------------PRESIDENT OF ADDAX

PETROLEUM BENIN AND BY

ORDER

MR. JEAN CLAUDE GANDUR

------------------------PRESIDENT OF THE ADDAX

AND ORYX GROUP

MR. WADE CHERWAYCO

-------------------PRESIDENT OF ABACAN

RESOURCE LIMITED (BENIN)



65



APPENDIX "A"

-----------COORDINATE REGION CONTRACT

-------------------------TOTAL AREA OF BLOCK 1: 551,3 Km2

1)



EXPLOITATION PERMIT

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



(62Km2)



1-B)

2-C)

3-D)

4-E)



6

6

6

6



2

2

2

2



2)



EXPLORATION PERMIT

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



16'

16'

11'

11'



28"

28"

43"

43"



North



43'

39'

39'

43'



(489,3



00"

55"

55"

30"



km2)



East



1-1)_

2-F)

3-G)

4-H



6

6

6

6



22'

05'

05'

21'



20"

00"

00"

23"



North



2

2

2

2



42'

44'

34'

34'



30"

12"

00"

00"



East



66



APPENDIX "B"

-----------MAP OF BENIN

67



APPENDIX "C"

-----------FORM OF BANK GUARANTEE

---------------------68



APPENDIX "D"

-----------ACCOUNTING AND FINANCIAL PROCEDURES

----------------------------------The present Appendix is

exploration and exploitation.



attached



and



is



made part of the Contract of



Dated

_________________________________________

Between

and



THE



THE



GOVERNMENT



SYNDICATE



ADDAX



OF



THE



REPUBLIC



PETROLEUM



-



OF



ABACAN



BENIN

BENIN



S.A.



69



TABLE OF CONTENTS

- ------------------PAGES

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER



1:

2:

3:

4:

5:

6:

7:

8:

9:

10:

11:

12:



General arrangements

Classifications, Distribution of costs and expenditures

Method of recuperation of Contractor's costs

Inventory and evaluation of assets

Report of activities during the Period of exploration

Production Report

Report on the value of the Production

Report on recoverable costs

Statement of expense and receipts

Yearly report

Yearly budget

Forecasts and long term plans



CHAPTER

CHAPTER



13:

14:



Procedures of accounting and financial

Disagreement with the Contract



revisions



70



CHAPTER



1:



GENERAL



ARRANGEMENTS



The present Appendix has for a main objective, to establish rules and accounting

procedures allowing the determination of investments, expenses, costs of

exploitation and receipts of the Contractor.

1.1



DEFINITIONS



Terms used

Contract.



in



1.2



REPORTS



the present Appendix have the same meaning as terms used in the

THAT



THE



CONTRACTOR



SHALL



PRESENT:



a) Within the thirty (30) days that follow the Date of commencement of the

Contract, the Contractor will submit for the Minister's approval the general

lines of one project of accounting procedures, of operational registries. These

procedures should be compliant to norms in Benin and compatible with those of

the International Oil industry. Within the sixty (60) days following the receipt

of the above documents, the Minister will either have to approve or ask for

their revision. Within ninety (90) days after the Minister's approval, the

Contractor, on the basis of the recommendations that are made will revise the

manuals and the accounting procedures which will be in force during the length

of the Contract.

b) The reports relating to

regularly produce are those that

Appendix and those that might

between Parties or that could be

1.3



ACCOUNTING



the Oil Operations that the Contractor should

are stipulated in the Contract, In the present

make the object of an agreement subsequently

required by the Beninese legislation.



SYSTEM



The Oil operations accounting system is prepared by the Contractor

according to the terms of the Contract and of the National Accounting Plan. The

whole cost (CCE) method of Capitalization will be used.

1.4



LANGUAGES



AND



UNITS



OF



AMOUNT



TO



BE



USED:



a) Amounts will be held in the local currency of Benin. Metric units and

Barrels will be measures concerned by the present Appendix. The language of use

will be French.

71



b) Rules of accounting and financial procedures

neither the Minister nor the Contractor undergo exchange

expense of either Party. However, if an exchange gain or

would be credited or debited to accounts foreseen by this



are directed so that

gains or losses at the

a loss is produced, it

Contract.



i) Receipts and expenses in Francs CFA or in American dollars will be

converted on the basis of the average between the exchange rate for the sale and

the exchange rate for the purchase of currencies in question, as published the

last day of the previous month by the specialized magazines of the BCEAO or of

the IMF.

ii) If an increase or reduction - isolated or cumulative -, of ten percent

(10%) or more occurs in the exchange rate between the CFA Francs and American

Dollars, during the course of any one month, the exchange rate to use would be

the following:



(1) For the period from the first day of the month until the day when such

increase or reduction occurs for the first time, the average of the official

exchange rate for the purchase and the sale between the American Dollar and the

CFA franc as published the last day of the previous month;

(2) For the period going from the day when this increase or reduction

occurs for the first time until the end of the Month, the mean of the official

exchange rate for the purchase and the sale between the American Dollar and the

CFA Franc published the day when such an increase or reduction would take

- -place.

1.5



PAYMENTS



a) All payments between Parties, except if stated otherwise, will be made

according to the Contract and by the intermediary of a bank that will be

designated by each of the Parties.

b) All the moneys due by one of the Parties, in virtue of the Contract,

during any one Month, will be subjected at the time of the payment, for every

day of the Month following their deadline, to a daily compound interest

corresponding to the rate of the Contract + 1

72



CHAPTER



2:



COST



AND



All expenses concerning

distributed as follows:



EXPENDITURES

the



Oil



Operations



will



be



classified,



and



2.1

Costs of exploration including all direct costs and indirect charges for

the oil exploration in the Contract Area, before obtaining the exploration

Permit, notably:

a) The geophysical studies, geochemical, paleontological, geological,

topographic and seismic studies and their respective interpretations.

b) The drilling and the coring of Exploration Wells and Appraisal Wells

under the condition that these are not transformed into Development wells.

c) The manpower, and the material used for the drilling of

Wells mentioned below including services there pertaining.



Exploration



d) Facilities used exclusively for this goal including access roads.

e) The service costs relative to operations as described in the Section 2.4

of the present Chapter and agreed upon between the Minister and the Contractor.

f) The

administrative and general expenses

Operations as described in the Section 2.5 of this

between the Minister and the Contractor.



relative

Chapter,



to Exploration

and agreed upon



g) All other contractual costs engaged before the beginning of the

commercial production and that would not have been foreign in Section 2.2.

2.2

Investments for Production development including all expenses during the

Operations of Development and Production, notably:

a) The drilling of Production Wells from a reservoir

whether these wells are dry or in production.



already



discovered,



b) The completion of wells for the purpose of production.

c) The intangible costs of drilling such as the manpower, the consumables,

and the services relative to the drilling and the deepening of wells for the

purpose of production.



73



d) Costs of development facilities such as pipelines, flexables, units of

production and treatment, wellhead and bottom hole equipment of wells, systems

for improved recovery, drilling platforms, facilities for the storage of

hydrocarbons,

terminals and jetties for exportation,

harbors and their

equipments and access roads for production activities.

e) Studies of engineering and design of installations for the field.

f) The service

Section 2.4 of this

Contractor.



costs relative to Production Operations, described in

Chapter and as agreed upon between the Minister and the



g) The administrative and general

described in Section 2.5 of the present

Minister and the Contractor.

h) All other Developmental

commercial production.

2.3

the



expenses relative to the operations

Chapter and as agreed upon between the



expenses



incurred before the beginning of the



Operating costs including the expenses undertaken for the functioning of

Field, after the beginning of commercial production. These include notably:

Costs



of



Expenses



electric

of



energy



upkeep



and



Costs



of



treatment,



Costs



of



the



Cost of

equipment.



supplies

repair



transport



production



transportation



Costs



related



to



Costs



of



Well



Costs



of



insurance



-on



safety,



of



to



power



the



Wells.



machines, equipments and facilities.



and storage of the Raw Oil or of the Gas.

production



control



laboratory.



the ground, by sea and by air of personal and

to



the



security



and



the



surveillance.



reconditioning.

and



certification



74



2.4

Costs of services representing the direct, or indirect expenses of

support services to the Oil Operations notably warehouses, jetties, ships,

vehicles, rolling motorized transports, aerial transports, safety stations and

fire stations, shops, water and sewers facilities, electric plants, lodgings,

recreational and communal facilities as well as the furniture, tools and

facilities used for these activities. Costs for one Calendar Year will include

the totality of the costs committed in the said year for the rental, purchase

and/or the building of such facilities as well as the committed yearly costs for

their operation and upkeep. The totality of service costs will be distributed

regularly, as stipulated above.

2.5



Administrative



and



a) all administrative

including personnel costs.



general



expenses



abroad



including:



and general expenses of the head office and offices



b) expenses of services provided by the head office outside of Benin.

The totality of administrative and general expenses, distributed as

stipulated above, will be defined every month of the Calendar Year by a Oil Cost

percentage accumulated during said Calendar Year according to the following



scale:

of



0



to



10,000,000



of



subsequent



10,000,000



in



of



excess



CHAPTER



3:



dollars



dollars



20,000,000



dollars



METHOD



OF



-



3%



-



2%



-



1%



RECUPERATION



OF



THE



CONTRACTOR



COSTS



By virtue of the arrangements of the Contract, the Contractor shall take to

his account all costs and expenses concerning the Oil Operations. They will be

recoverable by the Contractor according to arrangements following:

3.1

Recoverable costs without approval of the Minister to operations

previously programmed by the Contractor and approved by the Minister according

to arrangements of the Contract.

They include: costs of exploration, costs of development, operating costs,

costs of services and the general administrative expenses described respectively

in sections 2.1; 2.2; 2.3; 2.4 and 2.5 hereinabove.

a)



WITH



REGARD



The costs of the

employed in conducting

taken in consideration



TO



PERSONNEL



Contractor's employees affected to Benin and directly

Oil Operations of temporary ' or permanent nature are

under the following conditions:

75





(i)



the total cost of salaries and wages.



(ii) the reasonable costs incurred by the Contractor for sickness leave,

disability benefits, living and lodging allowances, travel, bonuses

and other generally applicable benefits to the salaries and wages as

direct costs in the framework of the present Appendix, as well as the

proportional costs relating to the benefits in employee favor such as,

among

others,

life

insurance and

sickness-insurance,

union,

hospitalization, retirement, bonus and other similar benefits.

(iii)expenses or contributions made regarding

organism in favor of said employees.



charges imposed by a public



(iv) expenses for the transportation of employees, of equipment, of

materials and of the necessary elements for the realization of the Oil

Operations.

(v)



costs incurred by the Contractor for the relocation of employees to or

from the Region of the Contract or in its neighborhood, whether they

are affected in a permanent or temporary manner to the Oil operations.



When an employee is affected to other activities, other than that of the

Oil Operations, costs of relocation must be imputed according to solid and

generally accepted accounting principles .

The costs of relocation of employees and their family, the move of the

personal effects and of the domestic articles of employees and their family and

all other expenses according to practices of the oil industry.

Costs of relocation from the Region of the Contract or its neighborhood,

toward another foreign place are not recoverable unless the foreign site is the

usual place of residence of the employees.

b)



WITH



REGARD



TO



OFFICES,



EQUIPMENTS



AND



VARIOUS



FACILITIES:



i)



Costs caused by the utilization of offices, dependences, camps,

storage depot, lodgings and other facilities of the Contractor in

Benin and serving directly to the Oil Operations. If these facilities

serve to other operations than the Oil Operations, and that it is not

possible to define expenses as direct expenses tied to the Oil

operations for which the service has been given, costs must be imputed

to facilities to which the service has been given, in a systematic and

reasonable manner.

76





ii)



c)



Costs caused by the acquisition, the rental, the installation, the

exploitation,

the

repair and the

maintenance

of systems of

communications, including the radio and VHF facilities used directly

for operations.

WITH



REGARD



TO



PROVISION



OF



SERVICES



i)



Costs and expenses incurred regarding Consultants used for technical

services and those of all other nature directly bound to the Oil

operations

including,

among others,

laboratory analyses,

the

industrial drawings, the geophysical and geological interpretations,

the engineering and the processing of data, obtained from external

sources.



ii)



The costs invoiced for services provided by Affiliated companies must

be competitive with services of the same quality provided by third

parties.



d)



WITH



REGARD



TO



THE



MATERIAL



AND



EQUIPMENTS



OF



THE CONTRACTOR



For the assessment of the material and equipment provided by the Contractor

from its own inventory or one of its Affiliated members, the values -"All," B"

or "C" must be taken in consideration, according to the case, being understood

that any value exceeding the just price of the market in Benin is not

recognized:

-



Material and new Equipments (Category "A")



The material and the new equipments are valued at the price of the

corresponding commercial invoice increased by the supplementary costs of import,

if the case arises, and of the other costs generally admitted by accounting

techniques and practices.

Material and used equipments (Category "B" and "C") . Are considered

in the "B" category the material and facilities that are not new but that can be

used without having to be refurbished; this material and these facilities are

valued to seventy-five percent (75%) of the price of the new material and

equipments.

Are considered in the "C" category facilities and the material which can be

used for their initial function after an appropriate refurbishing. These

equipments and materials are valued at fifty percent (50%) of the price of new

equipments and materials.

77



1-2)_

i)



With



regard



to



the



acquisition



of



goods



and



equipments



The cost of acquisition of goods and equipments from third parties

must include expenses of custom agents, of transport, of loading and

unloading and procedures of purchase, export or import duties and

expenses caused by obtaining licenses as well as losses of equipments

and goods in transit if these are not covered by an insurance. The

accumulation of excess stocks must be reduced to the minimum, taking



into account the localization of sources of provisioning and the

necessary time for the delivery of goods and equipments from distant

locations.

ii)



All material bought by the Contractor in the conducting of Oil

Operations will be inspected by the Government diligence before their

use according to the regulations in force.



iii) The Contractor not guaranteeing the material beyond the guarantee of

the supplier or the manufacturer, any sums received by the Contractor

from the suppliers, manufacturers or of their representatives in

compensation for deficient materials or equipments will be written to

the credit of the Contractor under the terms of the Contract and will

be deducted from recoverable costs.

f)



WITH



REGARD



TO



INSURANCE



COSTS



This means costs incurred by the Contractor or by an Affiliated Company to

subscribe to an ins ice policy in the framework of the, Operations and this on a

competitive basis.

g)



WITH



This

employees

h)



REGARD



RECOVERABLE

These



TRAINING



COSTS



means expenses incurred by the Contractor for the training of its

and for all other necessary training according to the Contract.

RENTAL



3.2



TO



COSTS

COSTS



ACCORDING

UNDER



TO



RESERVE



ARTICLE

OF



THE



4



OF



THE



MINISTER'S



CONTRACT

APPROVAL



are:



78



a) Research and development costs for new equipment, materials and

techniques intended for exploration, development and the production of Oil which

are not included in the work program approved by the Minister.

b) Of costs and expenses not mentioned in the present Appendix and that are

incurred during the Petroleum Operations .

c) Of interest charges incurred on loans received by the Contractor for the

financing of the Petroleum Operations. All interest rates conform to the

international financial market and agreed upon by both Parties are recoverable.

d) Rents, Charges and other taxes:

Rents, excluding the residences of the Contractor, taxes, contributions, duties,

subscriptions and all other taxes and charges levied by the State concerning the

Petroleum Operations and paid directly or indirectly by the Contractor,

according to the clauses of the Contract.

e) Of costs and losses incurred as a consequence of events that are not

foreseen by insurance as defined in the Contract, except in the case where costs

and losses would be the exclusive result of a mistake or an act of gross

carelessness by the Contractor or an Affiliated Company or one of its

subcontractors.

f) Of legal costs and expenses relative to the Petroleum Operations.

79



3.3



NON



RECOVERABLE



COSTS



These



are:



a) Fines, supplements and adjustments for delay in the payment of duties or

taxes prevailing in the country or adjustments for incorrect payment of these

taxes provided that such a delay or incorrect payment is attributable to the

Contractor.

b) Of import duties of goods and equipment not proving necessary to the

Petroleum Operations, and for housing of non necessary personnel.

c) Of all costs and

Contract.



expenses



incurred



before



the



starting



date of the



d) Of expenses pertaining to interests on credit for receivable.

e) Expenses made due to non fulfillment of the Contract obligations.

f) Of expenses pertaining to Petroleum

as a result of a major technical error

subcontractors.



Operations which are badly executed

by the Contractor or any of its



g) Of costs and expenses of all banking guarantee tied to the Contract.

h) Of grants in general.

i) Of advertisement expenses.

j) The costs of inventory taking in case of the Contractor

according to the Contract.

k) The commercialization

Delivery point.



costs of the Crude or its



rights transfer



transport



beyond the



l) The costs of appraisals and arbitrations described in the Contract.

m) Of the additional sum of 300% tied to Operations in Sole risks.

n) Of Commissions paid by the Contractor to intermediaries.

o) Of costs and expenses without accounting receipts.

80



p) Of costs and expenses of goods or services exceeding the price of

similar goods or services in the area of West Africa at the moment of their

acquisition if circumstances didn't justify such costs and expense surplus.

CHAPTER



4:



INVENTORIES



AND



ASSESSMENT



OF



ASSETS



4.1

The Contractor must hold the licences of real estate possessions and

other assets used in the Petroleum Operations according to the normal accounting

practices of the country and the International Oil industry.

4.2

At reasonable intervals, but at least once per year pertaining to mobile

assets and at least every three (3) years for the case of real estate assets,

the Contractor will make an inventory of the goods concerned by the Contract. At

least thirty (30) days in advance, the Contractor will communicate in writing to

the Minister its intention to make the said inventory; the Minister will be

represented during the realization of this inventory. The Contractor will

clearly express the

principles used for the valuation of stocks.

4.3

time



he



The Minister can ask the Contractor for information on its assets at any

judges necessary.



CHAPTER



5:



REPORT



OF



ACTIVITIES



DURING



THE



EXPLORATION



PERIOD



5.1

During the exploration period, the Contractor will prepare for every

trimester, a report of activities which includes:

the list with a detailed description of activities achieved during the aforesaid

trimester. This report will be based on plans, maps, cross sections and all

other data indicating the level of completion of the work being performed. the

costs relative to the different activities mentioned above.

5.2

The activity report will be submitted to the Minister for approval

within a time limit of thirty (30) days after the end of the trimester

considered.

CHAPTER



6:



PRODUCTION



REPORT



6.1

Once the commercial production begins in the Contract Area, the

Contractor shall prepare for every Trimester a production report for each

exploitation zone which will include the following data;

81



a) The quantity of Crude oil produced and stored during the Trimester.

b) The

Trimester.



quantity



of Crude Oil used for



Petroleum



Operations



during



the



c) The quantity of Crude Available at the end of the Trimester concerned .

d) Parameters and performances of the reservoir; recordings of the logs and

well tests and their interpretations; analyses of the fluids produced.

6.2

The production

Minister for approval

Trimester considered.



report

within



for

the



every Trimester will be submitted to the

thirty (30) days following the end of the



82



CHAPTER



7:



REPORT



ON



THE



VALUE



OF



THE



PRODUCTION



7.1

The Contractor shall prepare a report on the precise determination of

the market value of the Crude produced and stored after losses relative to the

Petroleum Operations during each Trimester. This report will contain the

following data:

a) The quantities sold and prices received by the Contractor as a result of

its sales of Crude to third parties during the Trimester considered.

b) Information obtained by the Contractor concerning the prices of Crude

produced by the main producers and exporting countries including contract

prices, discounts and bonuses, as well as the prices received on the spot

markets.

7.2

The report on

Minister for approval

CHAPTER

8.1

the



8:



the value of the production, will be presented to the

within the thirty (30) days following the Trimester.



RECOVERABLE



COSTS



REPORT



The Contractor should prepare, for every Quarter, a report concerning

recoverable costs, a report which will contain the following information,:



a) The recoverable

previous Quarter.



Petroleum



Costs,



carried over if necessary,



from the



b) The recoverable Petroleum Costs of the Quarter considered.

c) The total amount of the recoverable

considered described in the paragraphs above.



Petroleum



Costs for the



d) The quantity and the total value of the Crude Oil

Contractor for the Cost Oil during the Quarter.



calculated



Quarter

by the



e) The Petroleum Costs recovered during the Quarter considered .

f) The cumulative

Quarter considered.



amount of Petroleum Costs recovered until the end of the



g) The amount of recoverable

next Quarter.



Petroleum Costs which must be reported to the



83



8.2

The report of the recoverable costs for each Quarter will be submitted

to the Minister for approval within thirty (30) days following the end of each

Quarter.

8.3

In spite of the obligation that it has to keep accounts in Francs CFA,

the Contractor will keep a separate account in US Dollars for the determination

of the Cost Oil.

84



CHAPTER



9:



STATEMENTS



OF



EXPENSES



AND



REVENUES



9.1

The Contractor should prepare for every Quarter, a statement of expenses

and revenues made in the framework of the Contract. This statement will make the

distinction between Exploration Costs, investment expenses, development and

exploitation expenses, and Operating Costs, and it will identify the main

categories of expenses corresponding to these. It will show notably:

a) Real expenses and revenues for the Quarter considered.

b) Cumulative expenses and revenues for the budget of the year considered.

c) The latest forecast of cumulative expenses till the end of the year.

d) Discrepancies

explanation.



between the estimated



budget and realizations and their



9.2

The statement of expenses and revenues for every Quarter will be

submitted to the Minister for approval within thirty (30) days following the end

of the Quarter considered.

CHAPTER



10:



YEARLY



REPORT



The Contractor should prepare a yearly report that will be the synthesis of

informations relating to the production, to costs recovery of costs, to revenues

and expenses. Said report will be based on the real volumes of Oil produced and

of the incurred expenses. From this report, any necessary adjustment will be

done to payments made to the Parties according to the Contract. The yearly

report for each Civil Year will be submitted to the Minister for approval within

sixty (60) days after the end of said Year.

CHAPTER



11:



YEARLY



BUDGET



11.1

The Contractor shall prepare a yearly Budget that will make the

distinction between Exploration Costs, Development and Exploitation Investment

and Operating Costs to outline the following:



a) Forecast of expenses and revenues for the

the Contract.



budgetary



year



according to



b) Cumulative expenses and revenues to the end of said budgetary Year.

85



c) Program showing the most important categories of expenses of development

and exploitation investment for said budgetary Year.

d) For a budgetary item and provided that he respects the General program

of the approved tasks, the Contractor is allowed to commit overrun expenses to

the limit of ten percent (10%) of said item and said expenses must be justified.

If this limit is exceeded, the Contractor will take all necessary arrangements

to inform the Minister and to justify all overrun of expenses within thirty (30)

days following its execution.

81



11.2

The yearly Budget will be presented to the Minister within a time limit

of ninety (90) days before the beginning of the year considered except for the

first Year of the Contract where the aforesaid Budget will be submitted within a

time limit of thirty (30) days after the Date of Commencement of the Contract.

CHAPTER



12:



FORECASTS



AND



LONGTERM



PLANS



The Contractor should prepare and should submit to the Minister the two (2)

following long term plans:

12.1



PROGRAM



OF



EXPLORATION



During phases of Exploration, the Contractor will prepare a Program of

Exploration for every phase starting from the Commencement Date of the Contract,

program that will contain the following information:

a) Evaluations of Exploration

of the program.



Costs showing expenses for each of the Years



b) Seismic operation details for each Year.

c) Details of drilling activities programmed for each Year.

d) Details of the utilization and requirements for



infrastructure for each



Year.

The program of exploration will be reviewed each Year. The Contractor will

prepare and will submit to the Minister, the first program of exploration within

the sixty (60) days following the Commencement Date of the Contract. It will do

thus each Year, within a time limit of forty-five (45) days, before the end of

the Civil Year.

86



12.2



DEVELOPMENT



FORECASTS



The Contractor shall prepare triennial Development forecasts beginning the

first day of January after the date of the first program of assessment has been

approved by the Minister. The Contractor will prepare and will submit to the

Minister development forecasts reviewed at least forty-five thus (45) days

before each civil Year, as long as required by the Contract or by common

agreement between Parties.

12.3



CHANGES



IN



PROGRAMS



AND



FORECASTS



The Minister and the Contractor agree that details of the Exploration

Program and Forecasts of Development may require changes due to changing

circumstances and results acquired. In this spirit, a revision of said programs

and forecasts may be done annually.

CHAPTER



13:



PROCEDURES



FOR



ACCOUNTING



&



FINANCIAL



REVISIONS



The terms of accounting and financial procedures may be amended by

agreement of both Parties. Amendments will be made in writing and will specify

the date to which they will come into effect.

CHAPTER

of



14



DISAGREEMENT



WITH



THE



CONTRACT



In the case of a difference between terms of the present Appendix and those

the Contract, those of the Contract will prevail.

87





Appendix "E"Abandonment Procedure

The following procedure of dismantling of the offshore facilities indicates the

steps to be implemented for the removal of the steel structures in water depths

from 85 to 150 feet ( 26m to 46m).

I.MOBILIZATION

- -------------1. Obtain all approvals and authorizations pertaining to the abandonment of

the facilities, and dump the structures into a deep water site.

2. Plug and abandon each well.

under the mud line.



Cut the guide



tubular of each well 15 feet



3. Evacuate all hydrocarbons out of the tanks and reservoirs,

with water all surface pipes, evacuation flowlines and pipelines.



and clean up



II. DISMANTLING

- ---------------1. Unhook and remove the mobile equipments and facilities.

2. Cut the feet and displace the bridge of the structure.

3. Cut the feet under the mudline and displace the jacket of the structure.

4. Drive back the jacket to an approved water depth.

88









EX-10.24

29





Exhibit



10.24

PURCHASE AND SALE AGREEMENT



BETWEEN:

ADDAX



PETROLEUM



BENIN



LIMITED

OF THE FIRST PART

- and -



ABACAN



RESOURCES



(BENIN)



LTD.

OF THE SECOND PART





TABLE OF CONTENTS

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



1.1

1.2

1.3

1.4

1.5



ARTICLE I

INTERPRETATION

----------------------------------------------Definitions

Incorporation of Appendices

Appendix References

Headings

Persons



2.1

2.2

2.3



ARTICLE II

SALE AND PRICE

----------------------------------------------Sale

Price

Deposit



3.1

3.2

3.3

3.4

3.5



ARTICLE III

REPRESENTATIONS AND WARRANTIES

----------------------------------------------Vendor's Representations and Warranties

Purchaser's Representations and Warranties

No Merger

Reliance

Claims



4.1

4.2



ARTICLE IV

CLOSING CONDITIONS

----------------------------------------------Vendor's Conditions

Purchaser's Conditions



5.1

5.2

5.3

5.4

5.5



ARTICLE V

CLOSING

----------------------------------------------Pre-Closing

Closing

Covenants

Conveyances

Possession, etc.



5.6



Data and Receipts



2

2

4

4

4

4



4

4

4

5

5

5

8

8

9

9

9

9

10

10

10

11

11

11

11

12



ii



5.7



Change of Corporate Name



12



ARTICLE VI

GENERAL

----------------------------------------------Remedies

Further Assurances

Construction

Time

Notices

Prior Agreements and Amendments

Entire Agreement

Enurement

Assignment

Counterpart Execution

Severability

Waiver

Amendment

Currency

Public Announcements



6.1

6.2

6.3

6.4

6.5

6.6

6.7

6.8

6.9

6.10

6.11

6.12

6.13

6.14

6.15



12

12

12

12

12

13

13

14

14

14

14

14

14

15

15

15



APPENDIX A

BLOCK 1 CONTRACT



16



APPENDIX B

BLOCK 1 CONTRACT

(ENGLISH VERSION)



17



APPENDIX C

BLOCK 4 CONTRACT



18



APPENDIX D

BLOCK 4 CONTRACT

(ENGLISH VERSION)



19



APPENDIX E

TRUST LETTER



20





PURCHASE AND SALE AGREEMENT

THIS

B



E



T



AGREEMENT

W



E



E



made



as



of



this



31st



day



of



July,



1997.



N:



ADDAX PETROLEUM BENIN LIMITED, a company organized and existing under the laws

of the Isle of Man and having its registered office at Victory House, Prospect

Hill, Douglas, Isle of Man (hereinafter referred to as the "Vendor")

OF THE FIRST PART

- and ABACAN RESOURCES (BENIN) LTD., a company organized and existing under the laws

of the Bahamas and having its registered office at Suite 303, Anbacher House,

East Sheet North, Nassau, Bahamas (hereinafter referred to as the "Purchaser")

OF THE SECOND PART



WHEREAS the Ministry of Energy of the Republic of Benin under a Letter of

Intent dated 8th March, 1996 expressed its intention to entrust the Vendor with

the redevelopment and exploitation of Seme Offshore and Onshore as well as the

exploration Block 1 (outside Seme) ("Block 1") subject to finalising the

negotiations of the Production Sharing Contract (the "Block 1 Contract") and the

Interministerial Commission on behalf of the Republic of Benin and the Vendor

have agreed on certain terms ("Terms") for the Contract, as detailed in the

Annex to the above Letter of Intent, also dated March 8, 1996;

AND WHEREAS, one prerequisite of the Terms requires the Vendor to produce

to the Government of the Republic of Benin ("Government") a contractual

partnership relating to the Vendor's position as contractor under the contract;

AND WHEREAS, the Government has accepted the Purchaser as partner of the

Vendor in its role as Co-contractor;

AND WHEREAS, on 1st February, 1997, the Vendor and the Purchaser have

jointly entered into the Block 1 Contract with the Government providing for the

exploitation and exploration of Block 1;

AND WHEREAS, on February 1, 1997 the Vendor and the Purchaser have jointly

entered into a second Production Sharing Contract (the "Block 4 Contract") with

the Government providing for the exploitation and exploration of Block 4;



AND WHEREAS the Purchaser and the Vendor constitute the "Contractor" under

both the Block 1 Contract and the Block 4 Contract and the Contractor is defined

in both these contracts as the "Consortium Addax Petroleum-Abacan Benin";

AND WHEREAS pursuant to a Purchase Agreement dated April 23, 1997 (the

"Purchase Agreement"), the Vendor and the Purchaser agreed, inter alia, that the

Purchaser would acquire from the Vendor an additional 35% interest in the

Contracts, that the Purchaser would pay 100% of certain of the costs payable by

the Vendor and the Purchaser under the Contracts, and that the Purchaser would

act as operator under the Contracts, but the parties have not completed such

purchase;

AND WHEREAS the Vendor and the Purchaser had previously determined that

they will jointly conduct the activities that may be carried on within the

Republic of Benin through Addax Petroleum Benin S.A. ("Addax S.A.") a company

registered under the laws of the Republic of Benin;

AND WHEREAS the Vendor desires to sell all of its remaining interest in

Block 1 and Block 4, and under the Block 1 Contract and Block 4 Contract to the

Purchaser, and the Purchaser desires to purchase all of such interest from the

Vendor;

AND WHEREAS the Vendor desires to sell and convey all of the Shares of

Addax S.A. to the Purchaser, and the Purchaser wishes to purchase such Shares,

upon the terms and conditions herein set forth;

NOW THEREFORE in consideration of the premises and of the covenants,

warranties, representations, agreements and payments herein set forth and

provided for, the parties hereto covenant and agree as follows:

ARTICLE I

INTERPRETATION

-------------1.1



DEFINITIONS

In



this



Agreement



(including



the



recitals hereto, this clause and each



appendix):

(a)



"ASSETS" means the 50% interest owned by the Vendor in Block 1 and Block

-------4 and its 50% interest in and to all property, assets and rights in the

Contracts, being all of the Vendor's right, title and interest in and to Block

1, Block 4 and the Contracts;

(b)



"BANK" means Cr dit

-----0251/529981/102/50 Reference:

(c)

the



Suisse.



CH



"Jacques



1211



Geneva



70,



Account



number:



Python/Benin";



"BLOCK 1" means Block 1 and Seme located in the territorial waters of

---------Republic of Benin, as more particularly described in the Block 1 Contract;



(d)



"BLOCK 1 CONTRACT" means "Le Contrat pour l'Exploration et

-------------------l'Exploitation P troli res Block Offshore No. 1 et Seme" dated February 1, 1997

between the Government and the Parties, a true copy of which is annexed hereto

as Appendix "A" and an English language translation of which is annexed hereto

as Appendix "B";

-2

(e)



"BLOCK 4" means Block 4 located

---------Republic of Benin, as more particularly



in



the



territorial waters of the



described in the Block 4 Contract;



(f)



"BLOCK 4 CONTRACT" means "Le Contrat pour l'Exploration et

-------------------l'Exploitation P troli res Block Offshore Profond No. 4" dated February 1, 1997

between the Government and the Parties, a true copy of which is annexed hereto

as Appendix "C" and an English language translation of which is annexed hereto

as Appendix "D";

(g)



"CFAF"

------



means



franc



de



la



communaut



francaise



en



Afrique;



(h)



"CONSENT" means the written consent of the Government to the purchase

--------and sale contemplated in this Agreement, such consent to be in a form and on

terms satisfactory to both the Vendor and the Purchaser;

(i)



"CONTRACT AREAS" means collectively the

----------------identified as such in each of the Contracts;

(j)



"CONTRACTS"

----------Contract;



means



collectively



the



Contract



Block



Areas defined and



1 Contract and the Block 4



(k)



"CLOSING" means the transfer of the Assets by the Vendor to the

--------Purchaser and the payment by the Purchaser to the Vendor of the purchase

consideration therefor, and the completion of all matters incidental thereto;

(l)

clause

(m)



"CLOSING DATE"

--------------5.2;

"EFFECTIVE TIME"

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



means the date on which Closing is to occur pursuant to



means



the



time



at



which



the Closing is complete;



(n)



"PARTY" or "PARTIES" means a party or the parties to this Agreement and

--------------respective successors and assigns;



their

(o)



"PLACE OF CLOSING" means the offices of Ma tre Nicolas de Gottrau,

-------------------Geneva, located at 9 rue Massot, Switzerland, Telephone: 41 22 1346 4645, Fax:

41 22 1346 85 76;

(p)



"PURCHASE PRICE" shall have the meaning ascribed thereto in clause 2.2;

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



(q)



"SHARES" means all of the issued and outstanding shares in the share

-------capital of Addax S.A., which consists of as at the date hereof 2,500 shares in

the share capital of Addax S.A.;

(r)



"TIME OF CLOSING"

------------------Closing occurs; and

(s)

rue



means



the



time



on



the Closing Date at which the



"VENDOR'S SOLICITOR" means the law firm of Ma tre de Gottrau, Geneva, 9

--------------------Massot, Switzerland, acting on behalf of Maitre Jaques Python



1.2



INCORPORATION

Appended



hereto



are



OF



APPENDICES



the



following



appendices:



-3

A

B

C

D

E



-



Block

Block

Block

Block

Trust



1 Contract

1 Contract

4 Contract

4 Contract

Letter



-



English



Version



-



English



Version



All appendices hereto are incorporated into and form part of this Agreement

by this reference as fully as though contained in the body of this Agreement.

References to "the Agreement" or "this Agreement" in an appendix means this

Purchase and Sale Agreement.

1.3



APPENDIX



REFERENCES



Wherever any provision of any appendix to this Agreement conflicts with any

provision of the body of this Agreement, the provisions of the body of this

Agreement shall prevail.

1.4



HEADINGS



The headings of clauses and subclauses herein and in the appendices are

inserted for convenience of reference only and shall not affect or be considered

to affect the construction of the provisions hereof.

1.5



PERSONS



In this Agreement references to persons include corporations, companies,

partnerships, trustees, trusts, unincorporated associations, individuals and

other entities of a similar nature and references to the masculine gender

include the feminine and neuter genders.

ARTICLE II

SALE AND PRICE



-------------2.1



SALE



The Vendor agrees to sell, assign and transfer the Assets and the Shares to

the Purchaser, and the Purchaser agrees to purchase the Assets and Shares from

the Vendor, in accordance with and subject to the terms and conditions set forth

in this Agreement.

2.2



PRICE



The purchase price (herein called the "Purchase Price") to be paid by the

Purchaser to the Vendor for the Assets and the Shares is an aggregate One

Million Three Hundred Seventy Five Thousand U.S. Dollars ($1,375,000 U.S.).

Subject to Clause 2.3, the Purchase Price shall be paid at Closing by banker's

draft.

2.3



DEPOSIT

-4-





(a)



Deposit At the time of execution and delivery of this Agreement, the

------Purchaser shall pay an amount of Four Hundred Thousand U.S. Dollars ($400,000

U.S.) (which amount is hereinafter called the "Deposit") to the Vendor's

Solicitor, to be held by the Vendor's Solicitor in an interest-bearing deposit

in trust for the Vendor and the Purchaser to be applied in accordance with the

terms of this clause 2.3.

(b)



At Closing If Closing occurs, the Deposit together with all interest

----------earned thereon shall be deemed to be paid over to the Vendor in partial

satisfaction of the Purchaser's obligation to pay the Purchase Price, at

Closing.

(c)



Forfeiture If Closing does not occur solely or primarily because the

---------Purchaser has wrongfully terminated this Agreement, or has wrongfully repudiated

or failed to perform one or more of its obligations hereunder, the Vendor shall

be entitled to the Deposit and all interest earned thereon on the Closing Date.

The Deposit and such interest shall thereupon be forfeited to the Vendor as

liquidated damages, and constitute a genuine pre-estimate by the Vendor and the

Purchaser of liquidated damages suffered or to be suffered by the Vendor by

virtue of the failure of the Purchaser to close and complete the transaction

contemplated herein in accordance with the terms of this Agreement.

(d)



Return of Deposit If Closing does not occur solely or primarily for any

----------------reason or circumstance including the termination of this Agreement pursuant to

subclause 5.2(b)(i) or (ii) other than one described in subclause (c) and,

without restricting the generality of the foregoing, if closing does not occur

because the Government does not provide the consent as contemplated in this

Agreement, the Purchaser shall be entitled to the return of the Deposit and all

interest earned thereon, and the Vendor shall on the Closing Date pay the

Deposit and such interest back to the Purchaser.

(e)



Dispute If the Vendor's Solicitor is notified by the Purchaser, or

------otherwise becomes aware or determines, that there is a dispute between the

Vendor and the Purchaser as to entitlement to all or part of the Deposit and the

interest earned thereon, the Vendor shall, unless the Vendor and the Purchaser

otherwise agree in writing prior to the Closing Date, pay the Deposit and

interest thereon (or that portion thereof as to which there is a dispute as to

entitlement) into the High Court of Justice in London, England.



ARTICLE III

REPRESENTATIONS AND WARRANTIES

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



VENDOR'S



The Vendor

Purchaser that:



REPRESENTATIONS



hereby



represents,



AND



WARRANTIES



warrants



and



covenants



to and with the



-5

(a)



Corporate Standing of the Vendor The Vendor is a company duly organized

-------------------------------and validly subsisting under the laws of the Isle of Man and is duly qualified

to do business as a corporation under the laws of Benin;

(b)



Requisite Authority of the Vendor (i) the Vendor has all requisite

------------------------------------corporate power and authority to enter into this Agreement and to perform its

obligations hereunder and (ii) the execution and delivery of this Agreement and

the consummation of the transaction contemplated herein by the Vendor have been

duly authorized by all necessary corporate action on the part of the Vendor;

(c)



No Conflicts The execution and delivery of this Agreement and the

------------consummation of the transaction contemplated herein by the Vendor will not

violate nor be in conflict with, or constitute a material default under, any

material provision of any agreement or instrument to which the Vendor is a party

or is bound, or, so far as it is aware, any judgment, decree, order, law,

statute, rule, licence, regulation, ordinance or any other law applicable to the

Vendor;

(d)



Execution of Documents (i) this Agreement has been duly executed and

-----------------------delivered by the Vendor and all other documents executed and delivered by the

Vendor pursuant hereto shall have been duly executed and delivered by the Vendor

and (ii) this Agreement does and such documents will, constitute legal, valid

and binding obligations of the Vendor enforceable in accordance with their

respective terms;

(e)



No Default under Laws The Purchaser has not received any notice of and

---------------------so far as it is aware is not in, default or violation of any order, rule,

regulation, writ, injunction or decree of any court or governmental authority or

any statute to the extent that any such default or violation would materially

and adversely affect the operation or ownership of any of the Assets;

(f)



Title to Assets (i) the Vendor has not done any act or thing whereby

----------------any of the Assets have been or will be sold or otherwise alienated and (ii) the

Assets are or will at Closing be free and clear of all liens, charges,

encumbrances, royalties, burdens, production payments, profits interests and

adverse claims whatsoever created by, through or under the Vendor;

(g)



Quiet Enjoyment Subject to the rents, covenants, conditions and

---------------stipulations in the Contracts and all other agreements pertaining to the Assets,

and on the Vendor's part thereunder to be paid, performed and observed, if

Closing occurs (i) the Purchaser may continue to hold and enjoy the Assets, for

the residue of their respective terms and all renewals or extensions thereof,

for the Purchaser's own use and benefit without any interruption of or by the

Vendor or any other person whomsoever claiming or to claim by, through or under

the Vendor and (ii) the Vendor binds itself to warrant and defend all and



singular

same or

Vendor;



the

any



Assets, against all persons whomsoever claiming or to claim the

part thereof or any interest therein by, through or under the



-6

(h)



Judgments, Lawsuits or Claims There are no material judgments

-------------------------------unsatisfied against the Vendor or any material consent decrees or injunctions to

which the Vendor is subject and there are no material proceedings, actions or

lawsuits in existence, or so far as the Vendor is aware, threatened or asserted,

against the Vendor with respect to any of the Assets;

(i)



Shares (i) the Vendor has or will have at the Time of Closing good,

-----marketable, beneficial and recorded title to the Shares purported to be owned by

the Vendor, and such Shares are free of all mortgages, charges, liens, pledges,

claims, security interests and agreements and other encumbrances of whatsoever

nature and no person, firm or corporation has any agreement or option or right

capable of becoming an agreement or option for the purchase from the Vendor of

any of the Shares except as provided herein, and the Vendor has good right, full

power and absolute authority to sell and assign its Shares to the Purchaser for

the purpose and in the manner as provided in this Agreement. Such Shares are

not subject to any shareholder, pooling, escrow or similar agreements; (ii) no

consents of, filings with or approval or any governmental or regulatory body

authority is required by the Vendor for its sale and transfer of its Shares to

the Purchaser, except as contemplated herein; and (iii) the Vendor is not

obligated to obtain the written consent of any person to the transaction

contemplated by this Agreement other than from those persons from whom consent

has, or prior to the Time of Closing, will be obtained.

(j)



Due Incorporation and Capitalization of Addax S.A. (i) Addax S.A. has

---------------------------------------------------been duly registered with the "Tribunal de Commerce" of Cotonou, on September

20, 1996 and is in good standing with respect to the filing of all returns and

notices required thereby; (ii) as of the date hereof the authorized and issued

share capital of Addax S.A. consists of 2,500 shares each with a value of 10,000

CFAF. The total paid in share value amounts to 25,000,000 CFAF; (iii) as at the

date hereof and at the Time of Closing there are not and will not be, any

outstanding subscriptions, options, rights, warrants or other agreements or

commitments obligating Addax S.A. to sell or issue any additional shares or

securities of any class of Addax S.A. or any securities convertible into any

shares of any class of Addax S.A.; (iv) Addax S.A. has not authorized delivery

of or delivered any application for amendment to its charter documents as at the

date hereof.

(k)



Subsidiaries and Securities Addax S.A. has no subsidiary corporations

----------------------------and owns no shares or securities of any other entity, and there are no

agreements of any nature to acquire any subsidiary or business or to acquire

howsoever any other business.

(l)



Dividends Addax S.A. has not authorized the payment or declaration of

--------any distribution on or in respect of any of its shares or securities by way of

dividend, redemption, purchase, return of capital or otherwise.

(m)



Business Addax S.A. has not carried on any business or operations of

-------any kind, and has no assets or liabilities, and will not have any assets or

liabilities at the Time of Closing.

(n)



Remuneration of Officers, Etc.

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



No payments have been made or authorized



by Addax S.A. to its officers, directors, shareholders or employees, or former

officers, directors, shareholders or employees, or to any person or company not

dealing at arm's length with it.

(o)



Capital Expenditures

--------------------authorized by Addax S.A



No



capital



expenditures



have



been



made



or



-7

(p)



Employees, Officers, Directors, Managers, Consultants The Vendor

--------------------------------------------------------guarantees that all employees, officers and directors of Addax S.A. will resign

at the Closing.

3.2



PURCHASER'S



The Purchaser

Vendor that:



REPRESENTATIONS



hereby



represents,



AND



WARRANTIES



warrants and covenants to and with the



(a)



Corporate Standing The Purchaser is a corporation duly organized and

------------------validly subsisting under the laws of the Bahamas and is duly qualified to do

business as a corporation under the laws of Benin;

(b)



Requisite Authority (i) the Purchaser has all requisite power and

-------------------authority to enter into this Agreement and to perform its obligations hereunder

and (ii) the execution and delivery of this Agreement and the consummation of

the transaction contemplated herein by the Purchaser have been duly authorized

by all necessary corporate action on the part of the Purchaser;

(c)



No Conflicts The execution and delivery of this Agreement and the

------------consummation of the transaction contemplated herein by the Purchaser will not

violate nor be in conflict with, or constitute a material default under any

material provisions of any agreement or instrument to which the Purchaser is a

party or is bound, or, so far as it is aware, any judgment, decree, order, law,

statute, rule, license, regulation, ordinance or any other law applicable to the

Purchaser;

(d)



Execution of Documents (i) this Agreement has been duly executed and

-----------------------delivered by the Purchaser and all other documents executed and delivered by the

Purchaser pursuant hereto shall have been duly executed and delivered by the

Purchaser and (ii) this Agreement does, and such documents will, constitute

legal, valid and binding obligations of the Purchaser enforceable in accordance

with their respective terms; and

(e)



No Default under Laws The Vendor has not received any notice of and so

---------------------far as it is aware is not in, default or violation of any order, rule,

regulation, writ, injunction or decree of any court or governmental authority or

any statute to the extent that any such default or violation would materially

and adversely affect the operation or ownership of any of the Assets.

3.3



NO



MERGER



The covenants, representations, warranties and indemnities set forth in

this Agreement shall be deemed to apply to all assignments, conveyances,

transfers and documents conveying the Assets from the Vendor to the Purchaser.

There shall not be any merger of any covenant, representation or warranty in

such assignments, transfers or documents notwithstanding any rule of law, equity

or statute to the contrary and all such rules are hereby waived.



3.4



RELIANCE



-8

Notwithstanding anything to the contrary herein expressed or implied, it is

acknowledged that the covenants, representations and warranties set forth in

clause 3.1 and 3.2 are relied upon by the Purchaser and the Vendor respectively

as being true on the date hereof and on the Closing Date and shall be deemed to

have been repeated at the Closing as being true in all material respects on the

Closing Date. Notwithstanding the Closing and deliveries of covenants,

representations and warranties in any other agreements or certificates at

Closing or prior or subsequent thereto or investigations by the parties hereto

or their counsel, the representations and warranties set forth in clauses 3.1

and 3.2 shall survive Closing for the benefit of the parties hereto for a period

which shall end two (2) years after the Closing Date. All other covenants,

representations and warranties set forth herein shall survive Closing for the

benefit of the parties hereto for the longest period permitted by law.

3.5



CLAIMS



If after Closing a party becomes aware of any facts which give rise to a

claim under any of the provisions of this Agreement, it shall forthwith notify

the other party hereto in writing of such facts and the provisions under which

the particular claim may arise. No claim may be made or legal proceedings

commenced in respect of a particular claim under clause 3.1 or 3.2 by a party

hereto thereunder unless such a notice in respect of the particular claim has

been given by the party advancing or who may advance the particular claim within

the said two (2) year period and legal proceedings shall not be commenced in

respect of a claim prior to the expiry of 30 days after the party against whom

the claim is made has received written notice as aforesaid, unless before the

expiry of the said 30 day period, the said two (2) year period will expire.

ARTICLE IV

CLOSING CONDITIONS

-----------------4.1



VENDOR'S



CONDITIONS



The obligation of the Vendor to sell the Assets to the Purchaser is subject

to the satisfaction at or prior to the Closing Date of the following conditions

precedent:

(a)



Representations True All representations and warranties of the

--------------------Purchaser contained in this Agreement shall be true in all material respects at

and as of the Closing Date and the Purchaser shall have performed and satisfied

all covenants and agreements required by this Agreement to be performed and

satisfied by the Purchaser at or prior to the Closing Date;

(b)

the



Payment The Purchaser shall have tendered in the form stipulated herein

------total amount payable at Closing by the Purchaser to the Vendor; and

-9-





(c)



Consents All consents, waivers, permissions and approvals required in

-------connection with the sale and purchase contemplated herein shall have been

obtained, including the Government Consent.

The conditions of this clause 4.1 shall be for the benefit of the Vendor and

may, without prejudice to any of its rights hereunder, be waived by the Vendor

in writing, in whole or in part, at any time. In case any of the said



conditions shall not be complied with, or waived by the Vendor, at or before the

Closing Date, the Vendor may rescind or terminate this Agreement by written

notice to the Purchaser.

4.2



PURCHASER'S



CONDITIONS



The obligation of the Purchaser to purchase the Assets from the Vendor is

subject to the satisfaction at or prior to the Closing Date of the following

conditions precedent:

(a)



Representations True All representations and warranties of the Vendor

--------------------contained in this Agreement shall be true in all material respects at and as of

the Closing Date and the Vendor shall have performed and satisfied all covenants

and agreements required by this Agreement to be performed and satisfied by the

Vendor at or prior to the Closing Date; and

(b)

the

31,



Government Consent The Government shall have provided the Consent to

------------------purchase and sale in the manner contemplated in this Agreement, by August

1997, or at the election of the Purchaser September 30, 1997.



The conditions of this clause 4.2 shall be for the benefit of the Purchaser and

may, without prejudice to any of its rights hereunder, be waived by the

Purchaser in writing, in whole or in part, at any time. In case any of the said

conditions shall not be complied with, or waived by the Purchaser at or before

the Closing Date, the Purchaser may rescind or terminate this Agreement by

written notice to the Vendor.

ARTICLE V

CLOSING

------5.1



PRE-CLOSING



At 9:00 a.m. (local Geneva time) on the last business day prior to the

Closing Date, the Vendor and the Purchaser shall meet at the Place of Closing

and shall execute and place in escrow with the Vendor's solicitors all of the

documents referred to in clause 5.4 and all other documents required hereunder

to be delivered at Closing other than any payments required hereunder. The

aforementioned documents shall be withdrawn from escrow at Closing for delivery

to the parties in accordance with this Agreement. The Vendor shall not be

required to execute at Closing any document of a type described in clause 5.4

unless a draft of the particular document in final form has been delivered to it

not later than two business days prior to the Closing Date.

-10

5.2



CLOSING



(a)

Closing shall occur at the Place of Closing at 6:00 p.m. (local Geneva

time) on the later of: (i) August 31, 1997; or (ii) the day that is the tenth

business day after both the Vendor and the Purchaser have been advised that the

Government has granted its Consent to the transaction contemplated by this

Agreement; or

(b)

If the Consent is not received by August 31, 1997, then the Purchaser

shall either: (i) terminate this Agreement, in which case the Deposit and

interest shall be refunded to the Purchaser without set-off or deduction as

provided for in subclause 2.3(d); or (ii) extend the term of this Agreement for

an additional 30 days. If the Purchaser extends the term of this Agreement for

an additional thirty (30) days but the Consent is not received by September 30,

1997, then after September 30, 1997 the Purchaser may terminate this Agreement,

in which case the Deposit and interest shall be refunded to the Purchaser



without



set-off



5.3



or



deduction



as



provided



for



in



subclause



2.3(d).



COVENANTS



Each of the parties hereto covenants and agrees with the other party hereto

to use all reasonable efforts until Closing to take or refrain from taking all

actions with the intent that the closing conditions set forth in Article IV

herein shall be satisfied, the representations and warranties herein made by it

shall be true and correct and all covenants and agreements herein made by it

shall have been performed.

5.4



CONVEYANCES



At Closing, the Vendor shall deliver to the Purchaser, and the Purchaser

shall deliver to the Vendor, all transfers, assignments and novation agreements,

conveyances and bills of sale with respect to the Assets and Shares as may be

reasonably required by the Vendor or the Purchaser for the purpose of giving

effect to this Agreement. It will not be necessary for any such documents to

have been executed prior to or to be executed at Closing by any parties thereto

other than the Vendor and the Purchaser. The Vendor shall co-operate with the

Purchaser to enable the Purchaser to secure execution of all such documents by

such other parties after Closing. If Closing occurs, the Purchaser shall

thereupon be liable for and shall perform as they become due all obligations in

respect of the Assets arising, occurring or relating to any period after the

Effective Time including without limitation the payments of all royalties under

the Contracts and the performance of all obligations under all operating

agreements relating to the Assets, notwithstanding that parties other than the

Vendor and the Purchaser may not have executed documents referred to in this

clause 5.4.

5.5



POSSESSION,

Possession



of



and



ETC.

title



to



the Assets and Shares will pass at Closing.

-11-





5.6



DATA



AND



RECEIPTS



At the Closing the Vendor shall deliver to the Purchaser all data,

interpretations and records which the Vendor has acquired upon Operator's

consent and/or for and on behalf of the joint account under the Block 1 Contract

and Block 4 Contract.

The parties acknowledge that, pursuant to the Block 1 Contract and the

Block 4 Contract, the Government of Benin is the owner of certain data. In the

event that the Government of Benin shall require delivery of any data to which

it is entitled under the Block 1 and Block 4 Contract, the Vendor shall deliver

such data either to the Government or to the Purchaser to hold as custodian

pursuant to the terms of the Block 1 Contract and Block 4 Contract.

5.7



CHANGE



OF



CORPORATE



NAME



Upon closing of the purchase and sale of the Shares, the Purchase shall

cause the name of Addax S.A. to be renamed to Abacan Petroleum Operations

(Benin) S.A. and obtain a new registered seat in Cotonou, Benin, such changes to

occur as soon as reasonably possible following the Closing.

ARTICLE VI

GENERAL

------6.1

If a

hereunder,



REMEDIES

party hereto improperly fails to perform any of its obligations

the other party shall be entitled to all remedies available to it



under this Agreement, at law, in equity or otherwise, expressly including

without limitation specific performance. The exercise by a party hereto of any

particular remedies shall not preclude the party from seeking, exercising or

invoking any other remedy available to it. The aforementioned remedies are

cumulative, and not mutually exclusive or dependent upon each other.

6.2



FURTHER



ASSURANCES



At Closing and thereafter as may be necessary or desirable, and without

further consideration, the parties hereto shall execute, acknowledge and deliver

such other instruments and shall take such other action as may be necessary to

carry out their respective obligations under this Agreement.

6.3



CONSTRUCTION



The Agreement herein shall, in all respects, be subject to and be

interpreted, construed and enforced in accordance with English law. Each party

hereto accepts the jurisdiction of the High Court of Justice in London and all

courts of appeal therefrom without reference to arbitration.

6.4



TIME

Time



shall



be



of



the



essence



in



this



Agreement.



-12

6.5



NOTICES



The



address



(a)



(b)



by



for notice of each of the parties hereto shall be as follows:

mail



or



delivery:



Vendor:



Addax Petroleum Benin Limited

9, rue du Valais

CH 1202, Geneve,Switzerland

Attention: President



Purchaser:



Abacan Resources (Benin) Limited

7th Floor, Folawiyo Plaza

38 Warehouse Road

Apapa, Lagos, Nigeria

Attention: President



by



telephone



or



telecopier:



Purchaser:



Telephone:

Fax:



234 1545 0283

234 1545 0301



Vendor:



Telephone:

Fax:



44 22 741 5010

44 22 741 5020



Either of the parties hereto may from time to time change its address for notice

herein by giving written notice to the other party hereto. Any notice may be

served by delivery to a party hereto or by mailing the same by prepaid post in a

properly addressed envelope addressed to the party hereto at its address for

notice hereunder or by telecopier to the telecopier number for notice hereunder.

Any notice given by delivery to a party hereto shall be deemed to be given and

received on the date of such delivery. Any notice given by mail shall be deemed

to be given and received on the sixth day (except Saturdays, Sundays, statutory

holidays and days upon which postal service in England is interrupted) after the

mailing thereof. Any notice given by telecopier shall be deemed to be given and



received

6.6



on



the



day



PRIOR



that



AGREEMENTS



it



is

AND



sent.

AMENDMENTS



Upon Closing being completed, this Agreement shall supersede and replace

any and all prior agreements between the parties hereto relating to the sale and

purchase of the Assets or any portion and may be amended only by written

instrument signed by the parties hereto. For greater certainty, this Agreement

shall not terminate the rights of the Parties under the Purchase Agreement dated

April 23, 1997 such that if this Agreement does not close the Parties will be

returned to the same positions they were in as of the date prior to the

execution of this Agreement. If this Agreement is completed, the Purchaser

shall not be under any obligation to make the payment required to be made under

the April 23, 1997 Purchase Agreement, as it is acknowledged that the 35%

interest that is the subject of that Purchase Agreement is a part of the 50%

interest being acquired pursuant to this Agreement.

-13

6.7



ENTIRE



AGREEMENT



This Agreement (including all appendices hereto) states and comprises the

entire agreement between the parties hereto. There is no representation,

warranty or collateral agreement relating to the sale and purchase of the Assets

except as expressly set forth herein.

6.8



ENUREMENT



This Agreement shall be binding upon and shall enure to the benefit of the

parties hereto and their respective successors, receivers, receiver-managers,

trustees and permitted assigns.

6.9



ASSIGNMENT



Neither party hereto may assign this Agreement or any of its rights or

obligations hereunder without first obtaining the consent of the other party

hereto.

6.10



COUNTERPART



EXECUTION



This Agreement may be executed and delivered in counterparts and, if so

executed and delivered, the execution and delivery of a counterpart by each of

the parties hereto shall constitute execution and delivery of this Agreement.

6.11



SEVERABILITY



If any provision of this Agreement or the application thereof to any person

or in any circumstances shall be held to be invalid, the remaining provisions of

this Agreement, and the application of the particular provision to persons and

in circumstances other than those as to which it had been held to be invalid,

shall not be affected by the invalidity.

6.12



WAIVER



The failure of any party to insist upon strict performance of a provision

of this Agreement, irrespective of the length of time for which the failure

continues, shall not constitute a waiver of the party's right to demand strict

compliance thereafter. No consent or waiver, express or implied, to or of any

breach or default in the performance of any provision of this Agreement shall

constitute a consent or wavier to or of any other breach or default.

6.13



AMENDMENT

No



amendment



to this Agreement shall be valid unless it is in writing and



signed



by



the



6.14

in



parties



hereto.



CURRENCY

All amounts of money referred to herein and all payments hereunder shall be

United States dollars.

-14-





6.15



PUBLIC



ANNOUNCEMENTS



The parties shall cooperate with each other in relaying information

concerning this Agreement and the transaction herein contemplated and shall

furnish to and discuss with the other party drafts of all press and other

releases prior to publication; and in particular, without limiting the

generality of the foregoing, the Purchaser shall not without the express written

consent of the Vendor reveal in any such release the identity of the Vendor or

the value of the transaction herein contemplated. Nothing contained in this

clause shall prevent a party at any time from furnishing any information to any

governmental agency or regulatory authority or to the public if required to do

so by any applicable law or regulation.

IN WITNESS WHEREOF the seals of the parties hereto have been affixed and

this Agreement has been delivered by their duly authorized officers on the date

first above written.

ADDAX



PETROLEUM



BENIN



LIMITED



Per:



/s/ Peter J. Fleimish

-----------------------PETER J. FLEIMISH, GENERAL MANAGER



ABACAN



Per:



RESOURCES



(BENIN)



LTD.



/s/ Wade Cherwayko

-------------------G. CHERWAYKO - PRESIDENT



WADE



Per:



/s/ Tunde Folawiyo

-------------------TUNDE FOLAWIYO - VICE-PRESIDENT

-15

APPENDIX A

BLOCK 1 CONTRACT

French



Text



-



Not



required



to



be



filed

-16-





APPENDIX B

BLOCK 1 CONTRACT

(ENGLISH VERSION)

This document has been filed as Exhibit 10.23 to the Form 10-KSB dated effective



March



1,



1999.

-17-





APPENDIX C

BLOCK 4 CONTRACT

French



Version



-



Not



required



to



be



filed.



-18

APPENDIX D

BLOCK 4 CONTRACT

(ENGLISH VERSION)

This document has been filed as Exhibit 10.22 to the Form 10-KSB dated effective

March 1, 1999.

-19

APPENDIX E

TRUST LETTER

July,



1997



ON BEHALF OF MA TRE JACQUES

MA TRE NICOLAS DE GOTTRAU

9 RUE MASSOT

GENEVA,

SWITZERLAND

Dear



PYTHON:



Sirs:



The undersigned, Abacan Resources (Benin) Ltd. (herein referred to as the

"Purchaser"), and Addax Petroleum Benin Limited (herein referred to as the

"Vendor"), are parties to a certain Purchase and Sale Agreement, dated July

,1997 between the Purchaser and the Vendor (herein referred to as the

"Agreement") a true copy of which is attached hereto as Schedule "A". In

connection with the Closing of the transactions contemplated in the Agreement

the Purchaser has placed on deposit with you the sum of $400,000.00 (U.S.)

(herein referred to as the "Funds"), in trust, with interest to follow

principal, pursuant to the terms hereof and thereafter to be held in trust by

you as follows:

a)

If the Closing occurs $400,000.00 (U.S.) together with all interest

earned thereon shall be released to the Vendor at the Closing; or

b)

If the Closing does not occur $400,000.00 (U.S.) together with all

interest earned thereon shall be released to the Purchaser on September 1, 1997,

or October 1, 1997 if the Purchaser has elected to extend the Closing pursuant

to Clause 5.2 (b) of the Agreement.

7.

Unless you have been advised otherwise in writing jointly by both

parties, you shall be at liberty and hereby directed to release the Funds in

accordance with the provisions hereof and the parties hereto agree to such

release thereof. You shall be entitled to release the Funds only on the joint

instructions made either by fax, letter or by courier and signed by the

President of the Purchaser, Mr. Wade Cherwayko and the President of the Vendor,

Mr. Marc Lorenceau jointly.



8.

forth



You shall have no duties or obligations other than those specifically set

herein.



9.

You shall not be obligated to take any legal action hereunder which

might, in your judgment, involve any expense or liability unless you shall have

been furnished with reasonable retainer or indemnity in respect thereof by the

undersigned, or any one thereof.

10.

You are not bound in any way by any other contract or agreement between

the parties hereto whether or not you have knowledge thereof or of its terms and

conditions and your only duty, liability and responsibility shall be to hold and

deal with the Funds as herein directed.

11.

You shall be entitled to assume that any instruction, notice and

evidence received by you pursuant to these instructions from either of the

undersigned has been duly executed by the party by whom it purports to have been

signed and you shall not be obligated to inquire into the sufficiency or

authority of any signatures appearing on such notice or evidence.

-20

12.

The undersigned jointly and severally covenant and agree to indemnify

you and to hold you harmless against loss, liability or expense incurred without

negligence or bad faith on your part arising out of or in connection with the

administration of your duties hereunder, including the costs and expenses of

defending you against any claim or liability arising therefrom.

13.

In the event of any disagreement between any of the parties to these

instructions or between them or any of them and any other person, resulting in

adverse claims or demands being made in connection with the Funds, or in the

event that you, in good faith, are in doubt as to what action you should take

hereunder, you may, at your option, refuse to comply with any claims or demands

on you, or refuse to take any other action hereunder, so long as such

disagreement continues or such doubt exists, and in any such event, you shall

not be or become liable in any way or to any person for your failure or refusal

to act, and you shall be entitled to continue so to refrain from acting until

(i) the rights of all parties shall have been finally adjudicated by the High

Court of Justice in London and all courts of appeal therefrom or (ii) all

differences shall have been adjusted and all doubt resolved by agreement among

all of the interested parties, and you shall have been notified thereof in

writing signed by all such parties. Your rights under this paragraph are

cumulative of all other rights which you may have by law or otherwise.

14.

are



as



For the purpose of these instructions, the addresses of the undersigned

set out in the Agreement.



15.

The terms of these instructions are irrevocable by the undersigned

unless revocation is consented to in writing by all of the undersigned.

16.

The terms herein shall be binding upon you and your successors in the

practise of law and upon the undersigned and the respective successors and

assigns to the undersigned.

17.

Unless

herein shall



otherwise

have the



set forth herein to the contrary, all terms as used

same meaning as ascribed to them in the Agreement.



18.

You shall be entitled, upon notice to the undersigned, to assign your

rights and obligations under this agreement to a member of the Law Society of

Switzerland residing in and practising law in the city of Geneva, provided that

such assignment shall not be effective unless and until such assignee has agreed

in writing to assume such obligations.

19.

Any dispute out of or in connection with this trust letter between the

Vendor's Solicitor on one side and the Purchaser and the Vendor on the other

side should be construed and interpreted under the law of Switzerland, Canton



Geneva, and

Switzerland.



shall



be



settled



under the jurisdiction of the Court of Geneva,



-21

Please



confirm



the



arrangement



herein



Yours

ABACAN



very



provided



by



signing



below.



truly,



RESOURCES



(BENIN)



LTD.



Per:/s/ Wade Cherwayko

-------------------ADDAX



PETROLEUM



BENIN



LIMITED



Per:/s/ Peter Fleimish

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



The undersigned agrees

above instructions.



to hold and deal with the Funds in accordance with the



Dated



Geneva,



MA



at



TRE



the



NICOLAS



City



DE



of



ON BEHALF

GOTTRAU



Switzerland,

OF



MA



TRE



as



of



JACQUES



the



day of July, 1997.



PYTHON:



Per:/s/ Nicholas de Gottrau

-------------------------[AUTHORIZED SIGNATURE]









EX-10.25

30





Exhibit



10.25

CONVEYANCE AGREEMENT



THIS



AGREEMENT



made



the



30th



day



of



September,



1997.



BETWEEN:

and



ADDAX PETROLEUM BENIN LIMITED, a company organized

existing under the laws of the Isle of Man and having its registered



office at Victory House, Prospect Hill, Douglas

(hereinafter referred to as the "Vendor")



Isle



of



Man

OF THE FIRST PART



-



and



-



ABACAN RESOURCES (BENIN) LTD., a company organized

and existing under the laws of the Bahamas and having its registered

office at Suite 303, Anbacher House, East Street North, Nassau,

Bahamas (hereinafter referred to as the "Purchaser")

OF THE SECOND PART



the



WHEREAS the Assignor is a party to those agreements (collectively called

"Agreements") described in Schedule A hereto;



AND WHEREAS by virtue of the Agreements, the Assignor holds an interest in

Concession Block 1 and Concession Block 4, both being located in the Republic of

Benin.

AND WHEREAS the Assignor wishes to convey and assign all of its right,

title, interest and estate in and to the Agreements to the Assignee;

NOW THEREFORE in consideration of the premises hereto and the mutual

covenants and agreements herein set forth, the parties hereto mutually covenant

and agree as follows:

1.

The Assignor hereby assigns, transfers, sets over and conveys to the

Assignee all of its right, title, interest and estate in and to the Agreements,

TO HAVE AND TO HOLD the same unto the Assignee for the Assignee's sole and

exclusive use and benefit absolutely.



2.

The Assignee hereby accepts the within conveyance and assignment and

covenants and agrees with the Assignor that it shall be bound by, observe and

perform the covenants, duties and obligations contained in the Agreements to be

observed and performed by the Assignor, to the extent that such covenants,

duties and obligations relate to a period, or arise, as the case may be, on or

after September 1, 1997 (the "Effective Date"), it being the intent and purpose

of the parties hereto that the Assignee shall hold all of the rights and

interests conferred in the Agreements from and after the Effective Date, for its

exclusive use and benefit absolutely.

3.

The Assignor covenants and agrees with the Assignee that it shall and

will, from time to time and at all times hereafter, at the request of the

Assignee, execute such further documents and assurances and do all such further

acts as may be reasonably required for the purpose of confirming and giving

effect to the transfer of all interests and rights of the Assignor to the

Assignee under and purusant to the Agreements.

4.

Nothing herein contained shall be construed as a release of the Assignor

from any obligation or liability under the said Agreement which obligation or

liability had accrued prior to the Effective Date.

5.

This Agreement may be executed in as many counterparts as are necessary

and, when a counterpart has been executed by each party, all counterparts

together shall constitute this Agreement.

6.

This Agreement shall enure to the benefit of and be binding upon the

Parties hereto and their respective successors and assigns.



IN WITNESS WHEREOF the parties hereto have executed and delivered this

Agreement as of the day and year first above written.

ADDAX



PETROLEUM



Per:



LIMITED



/s/ Marc Lorenceau

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



ABACAN



Per:



BENIN



RESOURCES



(BENIN)



LTD.



/s/ Wade Cherwayko

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





SCHEDULE A attached to and forming part of an ASSIGNMENT AND NOVATION AGREEMENT

made the 30th day of September, 1997, between Addax Petroleum Benin Limited, as

Assignor, and Abacan Resources (Benin) Ltd., as Assignee.



AGREEMENTS

1.

"Le Contrat pour l'Exploration et

Offshore No. 1 et Seme" dated February



l'Exploitation Petrolieres - Block

1, 1997.



2.

"Le Contrat pour l'Exploration et l'Exploitation Petrolieres - Block

Offshore Profond No. 4" dated February 1, 1997.











EX-10.26

31



Exhibit

THIS



10.26

AGREEMENT



made



effective



as



of



the



18th



day



of



July,



1996.



BETWEEN:

LIBERTY TECHNICAL SERVICES LTD., a body corporate, incorporated under the laws

of the Commonwealth of Bahamas, with an office in Lagos, Nigeria

(hereinafter called the "Corporation")

-andTEXADA HOLDINGS LTD., of Nassau, Bahamas

(hereinafter called the "Consultant");

CONSULTING SERVICES AGREEMENT



----------------------------RECITALS:

A.

The Corporation is principally engaged in the business of exploration and

development of oil and gas properties located principally in Nigeria, Africa;

B.

The Corporation is desirous of engaging the consulting services and

expertise of the Consultant on the terms, conditions and for the consideration

as hereinafter set forth; and

C.

The parties desire to enter into this Agreement to set forth the terms

pursuant to which the Consulting Services will be provided to the Corporation

and the respective rights and obligations of the parties hereto.

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the

premises, the mutual covenants and agreements herein contained and other good

and valuable consideration, the receipt of which is hereby acknowledged, the

parties hereto mutually covenant and agree as follows:

ARTICLE 1

CONTRACT FOR SERVICES

--------------------1.01

Subject to the prior termination of this Agreement as hereinafter

provided, the Corporation hereby agrees to contract for and retain the services

of the Consultant (hereafter the "Consulting Services") which Consulting

Services are to be provided in accordance with the terms and provisions hereof.

1.02

The Consultant covenants and agrees with the Corporation that it shall,

for the duration of this Agreement provide an individual having satisfactory

professional qualifications and working credentials (the "Named Representative")

to perform the Consulting Services. Where the context so requires, any

reference to the performance of the Consulting Services shall imply that the

Name Representative shall perform such services on the Consultant's behalf. The

Consultant appoints Thomas Horricks as the Named Representative under this

agreement. The Consultant may not change the Named Representative without the

express consent of the Corporation. The Corporation shall not be responsible or

liable for the payment of any compensation (except as specifically set out

herein) to the Named Representative.



1.03

The Consultant shall be responsible for and shall have such authority as

is consistent with the position of Drilling Manager of the Corporation,

subject to the power, direction and control of the board of directors of the

Corporation (the "Board") or the Operating Committee of the Corporation (the

"Operating Committee").

1.04

Notwithstanding Article 1.03 hereof, the Consulting Services shall

include the services set forth below, and which Consulting Services shall be

provided on the basis of the following terms and conditions:

(a)



the Consultant shall control, supervise, manage and direct the

operations of the Corporation, as they relate to the planning,

drilling, testing and completion of oil and gas wells. The duties of

the Consultant shall include the following:

(1)



assist in all well planning and

performed by the Corporation;



implementation



activities being



(2)



manage, oversee and where applicable, co-ordinate and control

well construction and related services being provided in respect

of wells to be drilled by or on behalf of the Corporation;



(b)



(3)



preparation of all well AFE's including the tracking of such

AFE's during drilling, testing and completion operations;



(4)



subject to the prior approval of the Operating Committee,

procurement of equipment and services as reasonably required for

the drilling and testing of wells;



(5)



management, supervision and reporting to Operating Committee of

day to day operations respecting the drilling and testing of each

well;



(6)



collection and archiving of all data and other information

obtained from each well during drilling and testing operations;



(7)



provision of regular drilling and other related reports to the

Operating Committee on a daily basis during drilling and testing

operations or at such other times as may be requested by the

Operating Committee;



(8)



liaise and provide assistance to other employees/consultants of

the

Corporation as required or directed by the Operating

Committee.



in addition to the duties set forth above, the Consultant shall

assume,

obey,

implement and execute such duties,

directions,

responsibilities, procedures, policies and lawful orders as may be

determined or given by the Board or Operating Committee from time to

time and report results of same as may from time to time be determined

by the Board or Operating Committee;

-2-





(c)



the Consultant shall faithfully, honestly and diligently serve the

Corporation and cooperate with the Corporation and utilize maximum

professional skill and care to ensure that all services rendered

hereunder are to the satisfaction of the

Corporation,

acting

reasonably, and to provide any other services not specifically

mentioned herein, which are in the best interests of the Corporation

are maintained;



(d)



the Named Representative's title shall be Drilling Manager;



(e)



the Consultant will, subject to the prior approval of the Board or

Operating Committee, arrange for the Named Representative to join in

or participate with organizations, clubs, associations or groups that

may provide good business contacts and learning facilities for the

benefit of the Corporation.



1.05

The Consultant agrees that the Named Represenative will be required to

devote the whole of his time, attention and best efforts to further the business

and interests of the Corporation during the period of this Agreement to the

exclusion of any and all other employment. Nothing herein shall prohibit the

Consultant or the Named Representative from being a shareholder in any

corporation whose common shares are traded publicly on a stock exchange. The

Named Representative shall not be entitled to be a director for any other

company without the prior consent of the Corporation.

1.06

The Consultant acknowledges and agrees that the Consulting Services are

of such a nature that regular business hours may be impossible. The Consultant

understands that it and the Named Representative may be required to provide the

Consulting Services in excess of eight (8) hours per day or five days (5) per

week, and on evenings, weekends and holidays. The Consultant agrees that the

consideration herein set forth shall be in full and complete satisfaction for

the Consulting Services to be provided hereunder, no matter when and how



performed and the Consultant releases the Corporation from any additional

obligation for pay or other compensation, whatsoever which it might have by

reason of any existing or future legislation or otherwise.

1.07

The Consulting Services shall be carried out and performed in Calgary,

Alberta or such other places as may be mutually agreed upon between the

Consultant and the Corporation.

ARTICLE 2

TERM OF CONTRACT

---------------2.01

Subject to prior termination pursuant to the terms contained in Article

9 hereof, the term of this Agreement respecting the provision of the Consulting

Services shall be for a period of three years commencing September 1, 1996 (the

"Commencement Date") to and including August 31, 1999 (the "Expiry Date"). The

first 90 days following the Commencement Date of this Agreement shall be the

"Probation Term" during which time the Consultant shall be subject to the

termination provisions contained in Article 9.01(a) hereof and such other terms

and conditions set forth throughout this Agreement.

-3

2.02

This Agreement may be renewed from time to time for a further one (1)

year term or such other term as the parties may agree, upon the written consent

of both parties hereto.

ARTICLE 3

COMPENSATION AND EXPENSES INCURRED BY CONSULTANT

-----------------------------------------------3.01

the

(a)



The Corporation shall pay the following fees (the "Consulting Fees") to

Consultant in respect of the provision of the Consulting Services:

the sum of United States dollars Ten Thousand Eight Hundred and Thirty

Four (U.S.$10,834) dollars per month (being U.S.$130,000 per annum)

from the Commencement date until the Expiry Date of this Agreement or

until this Agreement is terminated in accordance with Article 9.01

herein.



The Consulting

term hereof.



Fees



shall be payable on the last day of each month during the



3.02

In addition to the Consulting Fees, the Consultant or, at its

discretion, the Named Representative shall receive 155,000 incentive stock

options (the "Stock Options") to purchase common shares of Abacan Resource

Corporation ("Abacan"), being the parent company of the Corporation. The Stock

Options are to be issued pursuant to and in accordance with the terms of the

incentive stock option plan of Abacan Resource Corporation (the "Plan") at an

exercise price of Cdn.$5.35 per common share, exercisable on or before five (5)

years from the date hereof. The issuance and exercise price of the Stock

Options shall at all times be subject to the terms of the Plan and applicable

regulatory and stock exchange approval. The Corporation may change the number

or price of the Stock Options issuable herein in accordance with the

requirements of the applicable regulatory authority or stock exchange, and any

such changes shall hereafter be binding upon the Consultant without additional

consideration. Provided that this Agreement has not been previously terminated

by the Corporation in accordance with the terms hereof, the Stock Options

granted hereby shall vest to the Consultant or the Named Representative as

follows:

(a)



55,000 Stock Options on December 1, 1996;



(b)



50,000 Stock Options on August 31, 1998;



(c)



50,000 Stock Options on August 31, 1999.



The Stock Options will be issued in accordance with the usual form of stock

option agreement currently in use by Abacan with such changes as counsel for

Abacan may advise in order to reflect the terms contained herein. The

Corporation acknowledges that in the event of termination of this agreement

pursuant to Article 9.01(d) (death of the Named Representative), all unvested

stock options shall immediately vest to the Consultant or the Named

Representative (as the case may be) on the date of termination.

3.03

In addition to the compensation set forth in Articles 3.01 and 3.02

herein, the Corporation shall pay the Consultant a premium of U.S.$300 per day

for each day the Named Representative is outside the continental United States

and Canada for business purposes. The premium does not apply to days ("Travel

Days") where the Named Representative is en-route by air to the business

destination where the Named Representative elects to travel to the business

destination in business class or equivalent. The premium will be payable in

respect of Travel Days if the Named Representative elects to fly economy class

or its equivalent.

-4

3.04

In addition to the other compensation set forth herein, the Corporation

shall pay the Consultant a one-time Pension Compensation Payment of U.S. $30,000

on September 1, 1996, in lieu of the Name Representative's loss of pension plan

from his previous employer. The Consultant shall be responsible for and promptly

pay any foreign and domestic taxes that may become payable in respect of the

Pension Compensation Payment.

3.05

In addition to the compensation set forth herein, the Corporation shall

pay for and on behalf of the Consultant the following costs and expenses:

(a)



corporate vehicle required for business purposes;



(b)



one half of the costs of a term life insurance policy for the Named

Representative in the amount of U.S.$500,000, with a double indemnity

provision in the event of accidental death. The Consultant is to

arrange for the aforesaid life insurance policy, the terms of which

are to be pre-cleared by the Corporation.



3.06

The Consultant shall be responsible for and shall pay any and all

domestic or foreign income or related taxes that may become payable by virtue of

receiving compensation for the provision of the Consulting Services.

3.07

The Consultant and the Named Representative are authorized to incur

reasonable expenses in or about the provision of the Consulting Services

hereunder, including living expenses of the Named Representative while absent

from his city of employment, travel and meeting expenses. Subject to approval,

the Corporation shall reimburse the Consultant for all such business expenses,

provided the Consultant or the Named Representative presents to the Corporation

the following:

(a)



A monthly expense report in a form acceptable to the Corporation

completed by the Consultant at the end of each calendar month:

(i)



stating the amount of the expenditure;



(ii) the time, place, and designation of the type of entertainment and

travel or other expense incurred by the Consultant;

(iii)the business reason for the expenditure and to the extent

possible, the nature of the business benefit derived or expected

to be derived as a result of the expenditure;



(iv) the names,

occupations,

addresses,

and other information

concerning each person who was entertained,

sufficient to

establish a business relationship to the Corporation.

(b)



Documentary evidence to be appended to the monthly expense report,

such as a receipt or a paid bill, that states sufficient information

to establish the amount, date, place, and the essential character of

the expenditure, for each expenditure.



3.08

The Named Representative shall be expected to travel on the

Corporation's behalf as required from time to time. Such travel shall be made

in accordance with the Corporation's domestic and international travel policies.

The Corporation acknowledges that all international travel will be business

class or equivalent and when not available, economy class or its equivalent.

-5

3.09

In the event the Named Representative is assigned overseas, the

Corporation will reimburse the Consultant for reasonable in-transit expenses for

the Named Representative and his dependants, such as meals, limousine and taxi

fares, tips, en-route accommodation, etc. for the initial assignment overseas,

transfer between foreign assignments and return to the Named Representative's

home of record. Included in the in-transit expenses will be an allowance of one

hundred (100) pounds weight for "unaccompanied air baggage" for the initial

assignment overseas, transfer between foreign assignments and return to the

Consultant's home of record. The Consultant shall provide an expenditure report

to the Corporation in respect of such expenses.

3.10

The Named Representative may be issued a corporate credit card of the

Corporation (the "credit card"). The Consultant confirms that the credit card

is supplied to be used exclusively to cover costs of business travel,

accommodation and meals incurred by the Named Representative while on business

for the Corporation outside of the city or location of his current assignment.

All expenditures incurred on the credit card shall be submitted to the

Corporation along with an expense report prepared by the Consultant or Named

Representative setting forth:

(a)



the date and place of expenditure;



(b)



the business reason for the trip abroad, including details of work

done while outside city or location of his current assignment;



(c)



the names of persons entertained while outside his city or location of

current assignment.



The Consultant agrees that the Named Representative will surrender the corporate

credit card to the Corporation immediately upon request and in any event, at the

Expiry Date of this Agreement.

ARTICLE 4

REVIEW OF COMPENSATION

---------------------4.01

Subject to renewal as herein provided, the remuneration payable

pursuant to Article 3.01 hereof may be reviewed annually by the Board or

Operating Committee on or before the anniversary date hereof, at which time the

Board shall consider such matters as it may consider relevant and shall

determine, in its absolute discretion, whether to maintain or increase the

annual remuneration payable by the Corporation to the Consultant hereunder. In

the event the Board or Operating Committee elects to amend the Consultant's

remuneration, such an amendment shall not effect the other provisions set forth

in this Agreement.



-6

ARTICLE 5

INCAPACITYOF NAMED REPRESENTATIVE

--------------------------------5.01

The Corporation agrees that the Named Representative shall be entitled

to reasonable time from service:

(a)



without loss of compensation payable to the Consultant, due to

sickness or injury or other incapacity on the part of the Named

Representative

directly

associated

with the provision of the

Consulting Services to the Corporation;



(b)



without compensation being paid to the Consultant due to sickness or

pre-existing injury or medical condition on the part of the Named

Representative on the effective date of this Agreement;



(c)



without compensation being paid to the Consultant for a voluntary

medical procedure on the part of the Named Representative, provided

that the prior consent of the Corporation is obtained.



5.02

Nothing herein shall prohibit the Corporation, during of the term of

any such incapacity of the Named Representative referred to herein from

terminating the services of the Consultant in accordance with Article 9.01

herein.

5.03

The Consultant shall, prior to the end of the Probation Term, advise

the Corporation in writing of any pre-existing medical condition, injury or

sickness on the part of the Named Representative that could prevent the Named

Representative from fully and effectively performing the Consulting Services on

behalf of the Consultant for the term of this Agreement.

5.04

The Consultant shall, prior to the end of the Probation Term, require

the Named Representative to submit to a full medical examination with a

practitioner of the Corporation's choice, all at the Corporation's cost.

5.05

The Consultant acknowledges that the Named Representative may, from

time to time and without notice, be required by the Corporation to submit to

tests and related procedures relating to the use of illicit or illegal drugs.

The Consultant shall enter into an agreement with the Named Representative

requiring the Named Representative to voluntarily submit to such tests when

requested in a co-operative manner. The Consultant waives any and all claims or

actions against the Corporation and its affiliates in respect of the

requirement of such tests whatsoever that he might have by reason of any

existing or future legislation and shall obtain a similar waiver from the Named

Representative upon request of the Corporation.

5.06

In the event the Consultant insures the Named Representative through

the Corporation or through a group plan provided by the Corporation for loss of

income as a result of disability and the Consultant receives compensation or

disability income pursuant thereto, then the amount of remuneration which the

Consultant is otherwise entitled to receive hereunder during the period of

illness or incapacity on the part of the Named Representative shall be reduced

by the amount of compensation or disability income paid by such insurer to the

Consultant or Named Representative and the Consultant covenants and agrees that

it shall immediately advise the Corporation from time to time of the receipt of

any such disability income paid by such insurer to the Consultant or the Named

Representative.

-7

ARTICLE 6



CONFIDENTIAL INFORMATION

-----------------------6.01

The Consultant covenants and agrees that during the term hereof and for

a period of three (3) years thereafter, it will keep in strict confidence

and shall not use, directly or indirectly, for any other purpose other than for

the purpose of providing services hereunder, all knowledge, information (whether

oral or written) and materials obtained or acquired during the course of its

providing services hereunder relating to the Corporation or their business and

affairs. Other than information disclosed or divulged to the Board or Operating

Committee and duly authorized officers and employees of the Corporation, the

Consultant will not disclose, divulge, publish or transfer, or authorize or

permit anyone else to disclose, divulge, publish or transfer or use to his own

advantage any such knowledge, materials, business data or other information

obtained pursuant to this Agreement or which relate in any manner to the

business and affairs of the Corporation, without the prior written consent of

the Corporation, which consent may not be arbitrarily or unreasonably withheld.

The Consultant shall obtain an undertaking of confidentiality from the Named

Representative in the form of Schedule "A" attached.

6.02

The obligation of the Consultant or the Named Representative as

identified in Article 6.01 hereof shall not apply to such knowledge,

information, material or business data obtained pursuant to this Agreement or

relating in any manner to the business affairs of the Corporation which:

(a)



was demonstrably known to the

pursuant to this Agreement;



Consultant



prior to receipt



thereof



(b)



is available to the public in the form of written publication;



(c)



shall have become

available to the

Consultant

or the Named

Representative in good faith from a third party who has a bona fide

right to disclose same; and



(d)



that information which is required to be disclosed to any federal,

provincial, state or local government or governmental branch, board,

agency or instrumentality necessary to comply with relevant timely

disclosure laws or regulatory authorities, including stock exchanges

having jurisdiction in respect of securities of the Corporation.

ARTICLE 7

VACATION

--------



7.01

The Named Representative shall be entitled to one (1) thirty day

(inclusive of business days and weekends) vacation (the "Vacation Period") for

each year throughout the term of this Agreement and any and all renewals

thereof, provided that the Named Representative shall not be entitled to take

any vacation time until following the expiry of the Probation Term. The

Consultant shall continue to receive the Consulting Fees during the Vacation

Term.

-8

ARTICLE 8

NON-ASSIGNABILITY

----------------9.01

This contract for Consulting Services and all other rights, benefits,

and privileges herein conferred may not be assigned by the Consultant without

the express written consent of the Corporation.

ARTICLE 9

TERMINATION



----------1.30



Notwithstanding the term of this Agreement as set forth in Article 2.01

hereof, this Agreement and the Consulting Services being provided shall be

terminable by the Corporation upon the occurrence of any one of the following

events:

(a)



at any time without

Probation Term;



notice or



additional



compensation



during



the



(b)



except in the case of termination for cause, at any time following the

Probation Term, upon the provision to the Consultant of ninety (90)

days written notice (or payment in lieu thereof) of its intention to

terminate this Agreement;



(c)



at any time by the Corporation, without notice, or additional

compensation for cause. "Cause" shall, without limiting its meaning in

common law, include the conviction of the Consultant or the Named

Representative for an indictable criminal offence, the failure of a

medical examination or drug test, or the breach by the Consultant or

the Named Representative of any of the covenants or terms of this

Agreement;



(d)



immediately upon the death of the Named Representative provided that

the Corporation agrees to pay the Consultant the equivalent of three

month's Consulting Fees;



(e)



immediately upon the Consultant or the Named Representative becoming

bankrupt or making an assignment for the benefit of creditors in

general without additional compensation;



(f)



immediately upon the Corporation becoming bankrupt or making an

assignment for the benefit of credits in general or ceasing to carry

on business for a period greater than six (6) months; and



(g)



immediately upon confirmation of permanent incapacity due to permanent

illness, injury or disability on the part of the Named Representative.

For the purposes hereof, "permanent incapacity" means illness, injury

or disability on the part of the Named Representative incurred while

performing the Consulting Services for the Corporation that in the

opinion of an independent medical expert acceptable to the Consultant

(or his legal personal representative) and the Corporation will

prevent the Named Representative from performing his duties or

providing the Consulting Services on behalf of the Consultant for a

period longer than six (6) consecutive months. Should the Named

Representative become permanently incapacitated and this agreement is

terminated for this reason, the Corporation shall pay the Consultant

the equivalent of three months Consulting Fees. All unvested stock

options shall vest to the Consultant or the Named Representative (as

the case may be) on the termination date in the event of termination

due to permanent incapacity.



-9

9.02

Subject to Article 10.04, in the event this Agreement is terminated in

accordance with the provisions of Article 9.01 hereof, the Consultant shall not

be entitled to additional remuneration payable by the Corporation hereunder from

and after the date of termination except as specifically provided in Article

9.01 herein. In the event the Named Representative is relocated overseas, the

Corporation shall pay for reasonable in-transit expenses to enable the Named

Representative to return to his home jurisdiction as set out in Article 3.08

upon the termination of this Agreement.

ARTICLE 10



CHANGE OF CONTROL, MERGER, AMALGAMATION, SALE OF ASSETS

------------------------------------------------------10.01



In



the



event



of:



(a)



a change of control of the Corporation or Abacan (as such term is

customarily used in the Securities Act, Alberta) through ownership of

its common shares; or



(b)



a change in all or

or Abacan; or



(c)



the Corporation or Abacan merging, amalgamating or re-organizing with

another corporation that is not an affiliate with the Corporation or

Abacan; or



(d)



the sale of all or substantially all of the assets or undertakings of

the Corporation, the Corporation shall provide the Consultant with

Notice of such events (the "Change of Control Event").



substantially



all of the Board of the Corporation



10.02

Not later than 30 days following the completion of the Change of

Control Event contemplated in Article 10.01(a), (b) or (c), the Corporation or

its successor shall advise the Consultant whether the Consultant Services are

still required.

10.03

Should notice be provided that the Consultant's services are still

required after the Change of Control Event, the Consultant, Corporation or the

successor shall continue to be bound by the terms of this agreement.

10.04

Should the Change of Control Event be pursuant to Article 10.01(d) or

should notice be provided that the Consultant's services are no longer required

after the Change of Control Event, in accordance with Article 10.02 herein, or

should the services of the Consultant be terminated within 30 days of the Change

of Control Event (other than in accordance with Article 9.01(c)),

(a)



the Consultant

shall be entitled to a lump sum payment upon

termination of the equivalent of three months Consulting Fees; and



(b)



all unvested stock options shall immediately vest to the Consultant or

the Named Representative (as the case may be) effective as of the

Change of Control Event.

-10-





ARTICLE 11

CONFLICT OF INTEREST

-------------------11.01

The Consultant covenants and agrees with the Corporation that during

the term hereof and for a period of three (3) years thereafter, it will not,

either individually or in partnership or jointly or in conjunction with any

person or association, syndicate, as principal, agent, shareholder, or in any

other manner whatsoever carry on or be engaged in or be concerned with or

interested in or advise, lend money to, guarantee the debts or obligations of or

permit its name or any part thereof to be used by any person or persons,

including, without limitation, any individual, firm, association, syndicate,

company, corporation, or other business enterprise, engaged in or concerned with

or interested in any business or any part thereof presently carried on by the

Corporation with respect to their business or any other business at any time

during the term hereof carried on by the Corporation, without the prior written

consent of the Corporation which consent will not be arbitrarily or unreasonably

withheld. The Consultant shall obtain an equivalent undertaking from the Named

Representative in the form of Schedule "B" attached.



11.02

During the period identified in Article 11.01, the Consultant shall not

solicit, engage in, assist or have an interest in or be connected with any

person, firm or corporation soliciting any customer known or ought to be known

to the Consultant to be a customer or business associate of the Corporation.

11.03

During the period identified in Article 11.01, the Consultant shall not

induce, entice or attempt to obtain the withdrawal from the Corporation of

any employee or management personnel either before or after the termination of

this Agreement.

-11

11.04

If the Corporation ceases to carry on business for a continuous period

of six (6) months or more, then the provisions of Article 6 and Article 11

hereof shall be null and void and shall cease to have any force and effect after

the expiration of the aforesaid period of time.

ARTICLE 12

NOTICES

------12.01

All notices required or allowed to be given under this Agreement shall

be made either personally or by mailing same by prepaid registered post,

addressed as hereinafter set forth or to such other address as may be designated

from time to time by such party in writing, and any notice mailed as

aforesaid shall be deemed to have been received by the addressees thereof on the

fifth business day following the day of mailing:

Corporation:



with



a



copy



Consultant:



Liberty Technical Services

7th Floor, Folawiyo Plaza

38 Warehouse Road, Apapa,

Nigeria

Fax: (234) 1-545-0301

to:



Ltd.

Lagos



Abacan Resource Corporation

1750, 800 - 5th Avenue S.W.

Calgary, Alberta

T2P 3T6

Fax: (403) 269-3944

Texada Holdings Ltd.

64 Tradewinds Building

Bay Street

P.O. Box N-8220

Nassau, Bahamas

Attention: Bruce C. Bell

Tel: (809) 322-8020

Fax: (809) 328-7330



Any party may from time to time change its address for service hereunder on

written notice to the other parties. Any notice may be served by hand delivery

or by mailing same by prepaid, registered post, in a properly addressed

envelope, addressed to the party to whom the notice is to be given at its

address for service hereunder.

-12

ARTICLE 13

SEVERABILITY

-----------13.01

Each

and distinct



provision of this Agreement is declared to constitute a separate

covenant and to be severable from all other such separate and



distinct covenants. If any covenant or provision herein is determined to be

void or unenforceable in whole or in part, it will not be deemed to affect or

impair the enforceability or validity of any other covenant or provision of this

Agreement or any part thereof.

ARTICLE 14

RELIEF

-----14.01

The parties to this Agreement recognize that a breach by the

Consultant or Named Representative of any of the covenants herein contained

would result in damages to the Corporation and that the Corporation could not

adequately be compensated for such damages by monetary award. Accordingly, the

Consultant agrees that in the event of any such breach, in addition to all other

remedies available to the Corporation at law or in equity, the Corporation will

be entitled as a matter of right to apply to a court of competent equitable

jurisdiction of such relief by way of restraining order, injunction, decree or

otherwise, as may be appropriate to ensure compliance with the provisions of

this Agreement.

ARTICLE 15

WAIVER

-----15.01

The parties agree that all restrictions in this Agreement are necessary

and fundamental to the protection of the Corporation and are reasonable and

valid, and all defences to the strict enforcement of Article 6 and Article 11

hereof by the Corporation are hereby waived by the Consultant.

ARTICLE 16

GENERAL

------16.01

The parties hereto agree that they have expressed herein their entire

understanding and agreement concerning the subject matter of this Agreement and

it is expressly agreed that no implied covenant, condition, term or reservation

or prior representation or warranty shall be read into this Agreement relating

to or concerning the subject matter hereof or any matter or operation provided

for herein.

16.02

The provisions of this Agreement will enure to the benefit of and be

binding upon the successors and assigns of the Corporation and Consultant

respectively.

16.03

Wherever the singular or masculine or neuter is used in this Agreement,

the same shall be construed as meaning the plural or feminine or a body

politic or corporate and vice versa where the context of the parties hereto so

require.

16.04



Time



is



of



the



essence



hereof.



-13

16.05

This Agreement shall be construed and interpreted in accordance with

the laws of England and each of the parties hereto hereby irrevocably attorns to

the jurisdiction of the courts of such jurisdiction.

IN WITNESS WHEREOF the parties

effective as of the date and year



hereto have

first above

LIBERTY



executed

written.



TECHNICAL



this



SERVICES



Agreement



LTD.



Per: /s/ Wade Cherwayko

-----------------------Wade G. Cherwayko, President

TEXADA



HOLDINGS



LTD.



Per: /s/ Bruce Bell

----------------Bruce C. Bell

-14

Schedule "A"

Undertaking of Confidentiality

-----------------------------In consideration of the execution of a Consulting Services Agreement between

Texada Holdings Ltd. (the "Consultant") and Liberty Technical Services Ltd. (the

"Corporation"), the undersigned covenants and agrees with the Consultant and the

Corporation as follows:

1.

That during the term of the Consulting Services Agreement and for a

period of three (3) years thereafter, I will keep in strict confidence and shall

not use, directly or indirectly, for any other purpose other than for the

purpose of providing services thereunder, all knowledge, information (whether

oral or written) and materials obtained or acquired during the course of the

provision of the services under the Consulting Services Agreement on behalf of

the Consultant relating to the Corporation or its business and affairs. Other

than information disclosed or divulged to the Board or Operating Committee and

duly authorized officers and employees of the Corporation, I will not disclose,

divulge, publish or transfer, or authorize or permit anyone else to disclose,

divulge, publish or transfer or use to his own advantage any such knowledge,

materials, business data or other information obtained pursuant to this

Agreement or which relate in any manner to the business and affairs of the

Corporation, without the prior written consent of the Corporation, which consent

may not be arbitrarily or unreasonably withheld.

2.

My obligation of confidentiality as identified above shall not apply to

such knowledge, information, material or business data obtained pursuant to this

Agreement or relating in any manner to the business affairs of the Corporation

which:



Dated



(a)



was demonstrably known by me

Consulting Services Agreement;



(b)



is available to the public in the form of written publication;



(c)



shall have become available to mr in good faith from a third party who

has a bona fide right to disclose same; and



(d)



that information which is required to be disclosed to any federal,

provincial, state or local government or governmental branch, board,

agency or instrumentality necessary to comply with relevant timely

disclosure laws or regulatory authorities, including stock exchanges

having jurisdiction in respect of securities of the Corporation.



this



____



day



of



August,



prior



to the



effective



date of the



1996

/s/ Thomas Horricks



------------------Thomas Horricks

-15

Schedule "B"

Undertaking of Non-Competition

-----------------------------In consideration of the execution of a Consulting Services Agreement between

Texada Holdings Ltd. (the "Consultant") and Liberty Technical Services Ltd. (the

"Corporation"), the undersigned covenants and agrees with the Consultant and the

Corporation as follows:

1.

That during the term of the Consulting Services Agreement and for a

period of three (3) years thereafter, I will not, either individually or in

partnership or jointly or in conjunction with any person or association,

syndicate, as principal, agent, shareholder, director, officer, employee or in

any other manner whatsoever carry on or be engaged in or be concerned with or

interested in or advise, lend money to, guarantee the debts or obligations of or

permit my name or any part thereof to be used employed by any person or persons,

including, without limitation, any individual, firm, association, syndicate,

company, corporation, or other business enterprise, engaged in or concerned with

or interested in any business or any part thereof presently carried on by the

Corporation with respect to its business or any other business at any time

during the term hereof carried on by the Corporation, without the prior written

consent of the Corporation which consent will not be arbitrarily or unreasonably

withheld.

2.

During the period identified above, I shall not solicit, engage in,

assist or have an interest in or be connected with any person, firm or

corporation soliciting any customer known or ought to be known by me to be a

customer or business associate of the Corporation.

3.

During the period identified above, I shall not induce, entice or attempt

to obtain the withdrawal from the Corporation of any employee or management

personnel either before or after the termination of this Agreement.

Dated



this



____



day



of



August,



1996

/s/ Thomas Horricks

------------------Thomas Horricks

-16-











EX-10.27

32



EXHIBIT

THIS



10.27



AGREEMENT



made



effective



as



of



the



10th



day of February, 1998.



BETWEEN

ABACAN



RESOURCE



CORPORATION,



a body corporate, incorporated under the laws of



the



Province



of



Alberta,



Canada



(hereinafter



called



the



"Corporation")



-andTIMOTHY T. STEPHENS,

"Employee");



of



the



City



of Houston, Texas (hereinafter called the



EMPLOYMENT SERVICES AGREEMENT

----------------------------RECITALS:

A.

The Corporation is principally engaged in the business of exploration and

development of oil and gas properties located principally in Nigeria, Africa;

B.

The parties desire to enter into this Agreement to set forth the terms

pursuant to which the Employee's services will be provided to the Corporation

and the respective rights and obligations of the parties hereto.

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the

premises, the mutual covenants and agreements herein contained and other good

and valuable consideration, the receipt of which is hereby acknowledged, the

parties hereto mutually covenant and agree as follows:

ARTICLE 1.

CONTRACT FOR SERVICES

--------------------1.01

Subject to the earlier termination of this Agreement as hereinafter

provided, the Corporation hereby agrees to contract for and engage the services

of the Employee as the President and Chief Executive Officer of the Corporation

(hereafter the "Employment Services") details of which are described herein all

in accordance with the terms and provisions hereof.

1.02

The Employee shall be responsible for and shall have such authority as

is consistent with the position of President and Chief Executive Officer of the

Corporation with the full power and authority to control, supervise, manage and

direct the day to day business and affairs of the Corporation except such

matters and duties as by law must be transacted or performed by the board of

directors and/or the shareholders of the Corporation, all subject to the power,

direction and control of the board of directors of the Corporation (the

"Board").

1.03

Notwithstanding Clause 1.02 hereof, the Employment Services shall

include the services set forth below, and which services shall be provided on

the basis of the following terms and conditions:

(a)

the Employee

business affairs of



shall control, supervise,

the Corporation;



(b)

in addition to the duties set forth

obey, implement and execute such duties,

procedures, policies and lawful orders as

Board of the Corporation from time to time

from time to time be determined by the



manage and direct all of the



above, the Employee shall assume,

directions, responsibilities,

may be determined or given by the

and report results of same as may

Board of the Corporation;





(c)

the Employee shall perform such duties and may exercise such powers as

may from time to time be assigned to or vested in him by the by-laws of the

Corporation;

(d)

the

Corporation



Employee shall faithfully, honestly and diligently serve the

and cooperate with the Corporation and utilize maximum professional



skill and care to ensure that all services rendered hereunder are to the

satisfaction of the Corporation, acting reasonably, and to provide any other

services not specifically mentioned herein, but which by reason of his

capability he knows or ought to know to be necessary to ensure that the best

interests of the Corporation are maintained;

(e)

the Employee's

Executive Officer;



title with the Corporation shall be President and Chief



(f)

the Employee will, subject to the prior approval of the Board, join in

or participate with organizations, clubs, associations or groups that may

provide good business contacts and learning facilities for the benefit of the

Corporation.

1.04

The Employee agrees to devote all or substantially all of his time,

attention and best efforts necessary to further the business and interests of

the Corporation during the period of this Agreement to the exclusion of any and

all other employment except as may specifically be approved by the directors of

the Corporation. Nothing herein shall prohibit the Employee from being a

shareholder in any corporation whose common shares are traded publicly on a

stock exchange.

1.05

The Employee acknowledges and agrees that the Employment Services are

of such a nature that regular business hours may be impossible. The Employee

understands that he may be required to provide the employment services in excess

of eight (8) hours per day or five days (5) per week and on evenings, weekends

and holidays. The Employee agrees that the consideration to be paid or which is

granted to the Employee as set forth herein shall be in full and complete

satisfaction for his work and Employment Services to be provided hereunder, no

matter when and how performed and the Employee releases the Corporation from any

obligation for pay or other compensation, whatsoever which it might have by

reason of any existing or future legislation or otherwise.

1.06

The Employment Services to be carried out and performed by the Employee

shall be carried out and performed in Houston, Texas, or such other places as

may be mutually agreed between the Employee and the Corporation.

ARTICLE 2.

TERM OF CONTRACT

---------------2.01

Subject to

9, the term of this

be for a period

"Effective Date")



prior termination pursuant to the terms contained in Article

Agreement for the provision of the Employment Services shall

of three (3) years from and including February 10, 1998 (the

up to and including February 9, 2001 (the "Expiry Date").



2.02

This Agreement may be renewed from time to time by the Corporation

prior to the Expiry Date for a further one (1) year term or terms or such other

term as the parties may agree upon the written consent of both parties hereto.

-2

2.03

Should this Agreement not be renewed by the Corporation on or before

the Expiry Date, the Corporation shall, on the Expiry Date, pay the Employee a

one-time departure fee (the "Departure Fee") equal to one (1) year Employment

Fees. The Departure Fee shall be the only compensation payable to the Employee

in the event of non-renewal of this Agreement by the Corporation, and the

Employee expressly confirms that upon payment of the Departure Fee, he is not

entitled to any other compensation, severance payment, Employment Fees or

termination fees whatsoever arising out of the non-renewal of this Agreement.

Nothing herein shall however prevent the Employee from exercising any or all

stock options that may have vested to him during the term hereof in accordance

with the provisions of the applicable stock option agreement, which shall

provide that Employee will have 90 days from date of termination within which to



exercise



such



vested



options.



ARTICLE 3.

COMPENSATION AND EXPENSES INCURRED BY EMPLOYEE

---------------------------------------------3.01

The Corporation agrees that commencing the Effective Date, the

Corporation shall pay the following fees (the "Employment Fees") to the Employee

in respect of the provision of the Employment Services:

(a)

the sum of United States dollars Two Hundred and Twenty-Five Thousand

($225,000.00) dollars per annum, payable in bi-monthly instalments of $ 9,375

(the "bi-monthly instalment") from the Commencement Date until the Expiry Date

of this Agreement or until the date this Agreement is terminated in accordance

with Article 9.01 herein, provided however that for the month of February 1998,

the monthly payment shall be 18/28 of the monthly instalment;

3.02

In addition to the payment of the Employment Fees, the Employee shall

be entitled to receive 1,000,000 incentive stock options (the "Stock Options")

to purchase common shares of the Corporation. The stock options will be issued

pursuant to and in accordance with the terms of the incentive stock option plan

of the Corporation, shall be at an exercise price per common share of $3.25

(Canadian dollars) which is the closing trading price for the Corporation's

shares on The Toronto Stock Exchange on February 10, 1998. The options shall

vest as follows:

(i)

(ii)

(iii)



one-third

one-third

one-third



(a)

(a)

(a)



immediately;

on

on



February



10,



February



The issuance and exercise price

subject to applicable regulatory



1999;



10,



and



2000.



of the stock options shall at all times be

and stock exchange approval.



3.03

The Employee shall be responsible for and shall pay any and all foreign

income or related taxes that may become payable by virtue of receiving

compensation for the provision of services contemplated herein.

3.04

The Employee is authorized to incur reasonable expenses in or about the

provision of his services hereunder, including living expenses while absent from

his city of employment and travel and meeting expenses. The Corporation shall

reimburse the Employee for all such business expenses upon provision of

satisfactory proof of such expenses to the Corporation.

3.05

The Employee shall be expected to travel on the Corporation's behalf as

required from time to time. Such travel shall be made in accordance with the

Corporation's domestic and international travel policies. The Corporation

acknowledges that all international travel will be first class or equivalent and

when not available, business class or its equivalent.

-3

3.06

The Employee may receive a corporate credit card of the Corporation

(the "credit card"). The Employee confirms that the credit card is supplied to

be used exclusively to cover costs of business travel, accommodation and meals

incurred by the Employee while on business for the Corporation outside of the

city or location of his current assignment. All expenditures incurred on the

credit card shall be submitted to the Corporation along with proof of such

expenditures in a form acceptable to the Corporation. The Employee agrees to

surrender the corporate credit card to the Corporation immediately upon request

and in any event, at the Expiry Date or Termination Date of this Agreement.

ARTICLE 4.



REVIEW OF COMPENSATION

---------------------4.01

Subject to renewal as herein provided, the remuneration payable

pursuant to Article 3.01 hereof may be reviewed annually by the Board of the

Corporation on or before the anniversary date hereof, at which time the Board

shall consider such matters as it may consider relevant and shall determine, in

its absolute discretion, whether to maintain or increase the annual remuneration

payable by the Corporation to the Employee hereunder. The Corporation shall not

be entitled to reduce the annual cash compensation payable hereunder. In the

event the Board elects to amend the Employee's remuneration, such an amendment

shall be in writing and shall not effect the other provisions set forth in this

Agreement.

ARTICLE 5.

INCAPACITY

---------5.01



The



Employee



shall



be



entitled



to



reasonable



time



from service:



(a)

without loss of compensation, due to sickness or injury or other

incapacity directly associated with the provision of the Employment Services to

the Corporation;

(b)

without compensation

condition on the effective

(c)

the



due to sickness or pre-existing injury or medical

date of this Agreement;



without compensation for a voluntary medical procedure, provided that

prior consent of the Corporation is obtained.



5.02

Nothing herein shall prohibit the Corporation, during the term of any

such incapacity referred to herein from terminating the services of the Employee

in accordance with Article 9.01 herein.

5.03



Health Benefits

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



The Corporation will pay the premiums for a newly created medical plan for

Employee, which

shall provide coverage for medical expenses for Employee and his family, such

plan to include major medical coverage underwritten by a recognized provider in

the United States. Policy documents govern benefit entitlement. Further,

whether self-insured or included as part of the medical coverage, expenses for

Employee and Employee's family dental bills will also be included. If

self-insured, Employee will submit such expenses as part of monthly expense

reports.

-4

ARTICLE 6.

CONFIDENTIAL INFORMATION

-----------------------6.01

The Employee covenants and agrees that during the term hereof and for a

period of one (1) year thereafter, he will keep in strict confidence all

knowledge, information (whether oral or written) and materials obtained or

acquired during the course of his providing Employment Services hereunder

relating to the Corporation or its business and affairs. Other than information

disclosed or divulged to the Board and duly authorized officers and employees of

the Corporation, the Employee will not disclose, divulge, publish or transfer,

or authorize or permit anyone else to disclose, divulge, publish or transfer or

use to his own advantage any such knowledge, materials, business data or other

information obtained in the course of providing the Employment Services,

pursuant to this Agreement or which relate in any manner to the business and



affairs of the Corporation, without the

Corporation, which consent shall not be



prior written consent

unreasonably withheld.



of



the



6.02

The obligation of the Employee as identified in Article 6.01 hereof

shall not apply to such knowledge, information, material or business data

obtained pursuant to this Agreement or relating in any manner to the business

affairs of the Corporation which:

(a)

was demonstrably known to the Employee prior to receipt thereof pursuant

to this Agreement;

(b)

(c)

party



is



available



to



the



public



in the form of written publication;



shall have become available to the Employee in good faith from a third

who has a bona fide right to disclose same; and



(d)

that information which is required to be disclosed to any federal,

provincial, state or local government or governmental branch, board, agency or

instrumentality necessary to comply with relevant timely disclosure laws or

regulatory authorities, including stock exchanges having jurisdiction in respect

of securities of the Corporation.

6.03

The Employee covenants and agrees that during the term and any

extensions or renewals hereof, the Employee shall maintain the terms of this

Agreement strictly confidential and shall not disclose the terms of this

Agreement to any other party or entity, except Employee's attorney or legal

counsel.

ARTICLE 7.

VACATION

-------7.01

The Employee shall be entitled to four (4) weeks paid vacation (the

"Vacation") for each year throughout the term of this Agreement and any and all

renewals thereof. The Vacation shall be taken from time to time at the

discretion of the Employee upon the provision of reasonable notice to the

Corporation.

ARTICLE 8.

NON-ASSIGNABILITY

----------------8.01

This Agreement for Employment Services and all other rights, benefits,

and privileges herein conferred are personal to the Employee and accordingly may

not be assigned by the Employee.

-5

ARTICLE 9.

TERMINATION

----------9.01

Notwithstanding the term of this Agreement as set forth in Article 2.01

hereof, this Agreement and the Employment Services being provided shall be

terminable by the Corporation upon the occurrence of any one of the following

events, the date of such termination to be hereafter called the "Termination

Date":

(a)

except in the case of termination for Cause under Article 9.01(b) or as

a result of the death of the Employee under Article 9.01(c) hereunder, at any

time prior to the Expiry Date, upon payment to the Employee of the Departure

Fee;



(b)

at any time by the Corporation, without notice, or additional

compensation for Cause. For the purposes herein, "Cause" shall, without

limiting its meaning in common law, include the conviction of the Employee for

an indictable criminal offence or the breach by the Employee of any of the

covenants or terms of this Agreement;

(c)

immediately upon the death of the Employee provided that the Corporation

agrees to pay the Employee's estate the equivalent of one years' Employment Fees

on the Termination Date;

(d)

for



the



immediately upon the Employee becoming bankrupt or making an assignment

benefit of creditors in general without additional compensation;



(e)

immediately upon confirmation of permanent incapacity due to permanent

illness, injury or disability on the part of the Employee. For the purposes

hereof, "permanent incapacity" means illness, injury or disability on the part

of the Employee incurred while performing the Employment Services for the

Corporation that in the opinion of an independent medical expert acceptable to

the Employee (or his legal personal representative) and the Corporation will

prevent the Employee from performing his duties or providing the Employment

Services on behalf of the Employee for a period longer than six (6) consecutive

months. Should the Employee become permanently incapacitated and this agreement

is terminated for this reason, the Corporation shall pay the Employee the

equivalent of one years' Employment Fees on the Termination Date.

9.02

Subject to Article 10.04, in the event this Agreement is terminated

accordance with the provisions of Article 9.01 hereof, the Employee shall not

entitled to other payments from the Corporation other than all stock options

provided for in Section 3.02, from and after the Termination Date except

specifically provided in Article 9.01 herein.



in

be

as

as



9.03

Notwithstanding any other provision of this Agreement, Employee may

terminate this Agreement at any time upon giving thirty (30) days written notice

to the Corporation.

ARTICLE 10.

CHANGE OF CONTROL, MERGER, AMALGAMATION, SALE OF ASSETS

------------------------------------------------------10.01



In



the



event



of:



(a)

a change of control of the Corporation (as such term is customarily used

in the Securities Act, Alberta) through ownership of its common shares including

a "takeover bid", an "exempt takeover bid", "issuer bid" or an "exempt issuer

bid"; or

-6

(b)

a change in a majority of the members of the Board of the Corporation or

the removal of the Employee as an officer or director of the Corporation; or

(c)

the

corporation

(d)

the



Corporation merging, amalgamating or

that is not an affiliate with the



the sale

Corporation;



of



re-organizing with another

Corporation; or



all or substantially all of the assets or undertakings of



the Corporation shall provide

"Change of Control Event").



the



Employee



with notice of such events (the



10.02

Not later than 30 days following the completion of the Change of

Control Event contemplated in Article 10.01(a), (b) or (c), the Corporation or

its successor shall confirm with the Employee whether the Employment Services of

the Employee continue to be required by the Corporation or its successor.



10.03

Should confirmation be provided that the Employment Services continue

to be required after the Change of Control Event, the Employee and the successor

Corporation shall continue to be bound by the terms of this agreement provided

that any change to the title, duties or responsibilities of the Employee with

the Corporation after the Change of Control Event shall, at the option of the

Employee, be deemed to be Termination and subject to Article 10.04 below, with

the Change of Control Event being the Termination Date for the purposes hereof.

All unvested Stock Options shall immediately vest to the Employee effective as

of the date of Change of Control Event.

10.04

Should at the time of the Change of Control Event notice be provided

in accordance with Article 10.02 herein that the Employment Services no longer

be required after the Change of Control Event, this Agreement shall be deemed to

be terminated by the Corporation on the date of the Change of Control Event and

the Employee shall be entitled to compensation equal to the accelerated amount

of all remaining payments under this Agreement. All unvested Stock Options

shall immediately vest to the Employee effective as of the date of Change of

Control Event.

ARTICLE 11.

INDEMNIFICATION

--------------11.01

The Corporation hereby agrees to indemnify and hold harmless Employee

from and against any and all losses, claims, damages, liabilities (or actions or

other proceedings commenced or threatened in respect thereof), any expenses that

arise out of, result from or in any way relate to this Agreement and Employee's

service as an officer and director of the Corporation, and to reimburse Employee

upon his demand, for any legal or other expenses incurred in connection with any

investigation, defending or participating in any such loss, claim, damage,

liability, action or other proceeding, other than any of the foregoing claimed

to the extent incurred by reason of the gross negligence of willful misconduct

of the Employee.

ARTICLE 12

NOTICES

------12.01

All notices required or allowed to be given under this Agreement shall

be made either personally or by mailing same by prepaid registered post,

addressed as hereinafter set forth or to such other address as may be designated

from time to time by such party in writing, and any notice mailed as aforesaid

shall be deemed to have been received by the addressees thereof on the fifth

business day following the day of mailing:

-7

Corporation:



Fax:



Abacan Resource Corporation

#140, 14811 St. Mary's Lane

Houston, Texas

77079

(281) 721-0560



Employee:



Timothy T. Stephens

3263 Reba Drive

Houston, Texas

U.S.A.



Fax:



(713)



522-0807



Any party may from time to time change its address for service hereunder on

written notice to the other parties. Any notice may be served by hand delivery

or by mailing same by prepaid, registered post, in a properly addressed



envelope, addressed to the party

address for service hereunder.



to



whom



the notice is to be given at its



ARTICLE 13.

SEVERABILITY

-----------13.01

Each provision of this Agreement is declared to constitute a separate

and distinct covenant and to be severable from all other such separate and

distinct covenants. If any covenant or provision herein is determined to be

void or unenforceable in whole or in part, it will not be deemed to affect or

impair the enforceability or validity of any other covenant or provision of this

Agreement or any part thereof.

ARTICLE 14.

RELIEF

-----14.01

The parties to this Agreement recognize that a breach by the Employee

of any of the covenants herein contained would result in damages to the

Corporation and that the Corporation could not adequately be compensated for

such damages by monetary award. Accordingly, the Employee agrees that in the

event of any such breach, in addition to all other remedies available to the

Corporation at law or in equity, the Corporation will be entitled as a matter of

right to apply to a court of competent equitable jurisdiction of such relief by

way of restraining order, injunction, decree or otherwise, as may be appropriate

to ensure compliance with the provisions of this Agreement.

ARTICLE 15.

WAIVER

-----15.01

The parties agree that all restrictions in this Agreement are

necessary and fundamental to the protection of the Corporation and are

reasonable and valid, and all defences to the strict enforcement of Article 6

and Article 11 hereof by the Corporation are hereby waived by the Employee.

-8

ARTICLE 16.

GENERAL

------16.01

The parties hereto agree that they have expressed herein their entire

understanding and agreement concerning the subject matter of this Agreement and

it is expressly agreed that no implied covenant, condition, term or reservation

or prior representation or warranty shall be read into this Agreement relating

to or concerning the subject matter hereof or any matter or operation provided

for herein.

16.02

The provisions of this Agreement will enure to the benefit of and be

binding upon the heirs, executors, administrators and legal personal

representatives of the Employee and the successors and assigns of the

Corporation respectively.

16.03

Wherever the singular or masculine or neuter is used in this

Agreement, the same shall be construed as meaning the plural or feminine or a

body politic or corporate and vice versa where the context of the parties hereto

so require.

16.04



Time



is



of



the



essence



hereof.



16.05

This Agreement shall be construed and interpreted exclusively in

accordance with the laws of England and each of the parties hereto hereby



irrevocably



attorns



to



the



jurisdiction



IN WITNESS WHEREOF the parties

effective as of the date and year



of the courts of such jurisdiction.



hereto have

first above



executed

written.



this



Agreement



ABACAN RESOURCE CORPORATION

Per: /s/ James Harvie

--------------------------James Harvie

Chief Operating Officer

Witness as to the signature of

Timothy T. Stephens

/s/

/s/ Timothy T. Stephens

- ------------------------------ --------------------------TIMOTHY T. STEPHENS

-9







EX-10.28

33



EXHIBIT



10.28

ABACAN RESOURCE CORPORATION

STOCK OPTION PLAN

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



1.



PURPOSE

-------



The purpose of the Stock Option Plan (the "Plan") of Abacan Resource

Corporation, a body corporate incorporated under the Business Corporations Act

(Alberta) (the "Corporation"), is to advance the interests of the Corporation or

any of its subsidiaries or affiliates by encouraging the directors, officers,

employees and consultants of the Corporation or any of its subsidiaries or

affiliates to acquire shares in the Corporation, thereby increasing their

proprietary interest in the Corporation, encouraging them to remain associated

with the Corporation or any of its subsidiaries or affiliates and furnishing

them with additional incentive in their efforts on behalf of the Corporation or

any of its subsidiaries or affiliates in the conduct of their affairs.

2.



ADMINISTRATION AND GRANTING OF OPTIONS

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



The Plan shall be administered by the Board of Directors of the

Corporation, or if appointed, by a special committee of directors appointed from

time to time by the Board of Directors of the Corporation (such committee, or if

no such committee is appointed, the Board of Directors of the Corporation is

hereinafter referred to as the "Committee") pursuant to rules of procedure fixed

by the Board of Directors.



The Committee may from time to time designate directors, officers,

employees and consultants of the Corporation or any of its subsidiaries or

affiliates (the "Participants") to whom options to purchase common shares of the

Corporation may be granted and the number of common shares to be optioned to

each, provided that the total number of common shares to be optioned shall not

exceed the number provided in clauses 3 and 4 hereof.

3.



SHARES SUBJECT TO PLAN

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



Subject to adjustment as provided in Section 15 hereof, the shares to be

offered under the Plan shall consist of shares of the Corporation's authorized

but unissued common shares.

If any Option granted hereunder shall expire or

terminate for any reason without having been exercised in full, the unpurchased

shares subject thereto shall again be available for the purpose of this Plan.

The aggregate number of shares to be delivered upon the exercise of all options

granted under the Plan (the "Options") shall not exceed the maximum number of

shares permitted under the rules of any stock exchange on which the common

shares are then listed or other regulatory body having jurisdiction.



the

the



(a) Maximum Number Subject to adjustment as provided in Section 15 hereof,

-------------aggregate number of common shares which may be reserved for issuance under

Plan shall not exceed 18,750,000 common shares.

(b) Restrictions Notwithstanding anything else herein contained:

-----------i)



the number of common shares which may be reserved for issuance

under the Plan and under any other employee stock option plans of

the Corporation to insiders (as defined in the Securities Act

(Ontario)) of the Corporation, and of any affiliate or subsidiary

of the Corporation, shall not exceed 10% of the outstanding issue

(as hereinafter defined);



ii)



the number of common shares which may be issued within a one year

period pursuant to the Plan and under any other employee stock

option plans or other share compensation arrangements of the

Corporation shall not exceed 10% of the outstanding issue;







iii) the number of common shares which may be issued pursuant to the

Plan and under any other employee stock option plans of the

Corporation to any one individual shall not exceed 5% of the

outstanding issue; and

iv)



the number of common shares which may be issued within a one year

period pursuant to the Plan and under any other employee stock

option plans or other share compensation arrangements of the

Corporation to any one insider of the Corporation, or of any

affiliate or subsidiary of the Corporation, and such insider's

associates shall not exceed 5% of the outstanding issue.



For the purposes of this subsection "outstanding issue" means the number of

common shares outstanding on a non-diluted basis, subject to applicable

adjustments as provided for in the by-laws and rules of any stock exchange

having jurisdiction.

For the purposes of this subsection "outstanding issue"

is determined on the basis of the number of common shares that are outstanding

immediately prior to the share issuance in question, excluding common shares

issued pursuant to share compensation arrangements over the preceding one year

period.

For the purposes of this subsection, an entitlement granted prior to

the grantee becoming an insider may be excluded in determining the number of

shares issuable to insiders.



4.



NUMBER OF OPTIONED SHARES

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



The number of shares subject to an Option to a Participant shall be

determined by the Committee, but no Participant shall be granted an Option which

exceeds the maximum number of shares permitted by any stock exchange on which

the common shares are then listed or other regulatory body having jurisdiction.

5.



VESTING

-------



The Committee may, in its sole discretion, determine the time during which

Options shall vest and the method of vesting, or that no vesting restriction

shall exist. Notwithstanding the terms of any agreement granting Options

pursuant to the Plan, all Options shall be deemed to have vested immediately

prior to a change of control of the Corporation.

and

the



For the purposes of this section, "change of control" means any purchase

sale of a sufficient number of voting securities so as to materially affect

control of the Corporation.



6.



MAINTENANCE OF SUFFICIENT CAPITAL

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



The Corporation shall at all times during the term of the Plan reserve and

keep available such numbers of shares as will be sufficient to satisfy the

requirements of the Plan.



7.



PARTICIPATION

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



The Committee shall determine to whom Options shall be granted, the terms

and provisions of the respective Option agreements, the time or times at which

such Options shall be granted, and the number of shares to be subject to each

Option. An individual who has been granted an Option may, if he is otherwise

eligible, and if permitted by any stock exchange on which the common shares are

then listed or other regulatory body having jurisdiction, be granted an

additional Option or Options if the Committee shall so determine.

8.



EXERCISE PRICE

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



The exercise price of the shares covered by each Option shall be determined

by the Committee. The exercise price shall be not less than the price permitted

by any stock exchange on which the common shares are then listed or other

regulatory body having jurisdiction.

The option price per common share shall be determined by the Board at the

time any option is granted but in no event shall such price be lower than the

Market Price (as hereinafter defined) at the time of the grant.

"Market



Price"



means:



(a) at any time during which the common shares are listed and posted for

trading on The Toronto Stock Exchange (the "TSE"), the closing sale price for

board lots of common shares on the TSE on the business day immediately prior to

the date of grant or if there is no sale of board lots of common shares on such

day, then the five-day weighted average trading price of the common shares on

the TSE;



(b) at any time during which the common shares are not listed and posted

for trading on the TSE, but are quoted on any other stock exchange, the closing

sale price for board lots of common shares on such exchange on the business day

immediately prior to the date of grant of the Option, or if there is no sale of

board lots of common shares on such day, then the average of the bid and asked

prices on such exchange for the business day immediately prior to the date of

grant of the Option, or if there are no bid and asked prices on such exchange on

such day, then the five-day weighted average of the closing sale prices for

board lots of common shares on such exchange based on the five business days

immediately prior to the date of grant of the Option; and

(c) at any other time, the fair market value of the common shares, as

determined by the Board, with due regard being had to any over-the-counter sale

prices, asked and bid prices, volume quotations, value of assets and liabilities

of the Corporation, and income and prospects of the Corporation, as the Board

shall in its sole discretion determine to be relevant.

9.



DURATION OF OPTION

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



Each Option and all rights thereunder shall be expressed to expire on the

date set out in the Option agreements and shall be subject to earlier

termination as provided in paragraphs 11 and 12.



10.



OPTION PERIOD, CONSIDERATION AND PAYMENT

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



(a) The Option period shall be a period of time fixed by the Committee, not

to exceed the maximum period permitted by any stock exchange on which the common

shares are then listed or other regulatory body having jurisdiction, provided

that the Option period shall be reduced with respect to any Option as provided

in Sections 11 and 12 covering cessation as a director, officer, employee or

consultant of the Corporation or any of its subsidiaries or affiliates or death

of the Participant.

(b) Except as set forth in Sections 10(c), 11 and 12, no Option may be

exercised unless the Participant is at the time of such exercise a director,

officer, employee or consultant of the Corporation or any of its subsidiaries or

affiliates.

(c) Notwithstanding any other provision to the contrary, an Option granted

to a consultant in connection with specific services provided or to be provided

by that consultant shall be exercised only after the date of completion of such

service and prior to 30 days following the date of completion of such service.

(d) The exercise of any Option will be contingent upon receipt by the

Corporation at its head office of a written notice of exercise, specifying the

number of shares with respect to which the Option is being exercised,

accompanied by cash payment, certified cheque or bank draft for the full

purchase price of such shares with respect to which the Option is exercised. No

Participant or his legal representatives, legatees or distributees will be, or

will be deemed to be, a holder of any shares subject to an Option under this

Plan, unless and until the certificates for such shares are issued to such

persons under the terms of the Plan.

11.



CEASING TO BE A DIRECTOR, OFFICER, EMPLOYEE OR CONSULTANT

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



If a Participant shall cease to be a director, officer, employee or

consultant of the Corporation or any of its subsidiaries or affiliates for any

reason (other than death), the Participant may but only within 90 days next



succeeding the Participant's ceasing to be a director, officer, employee or

consultant, exercise the Participant's Option to the extent that the Participant

was entitled to exercise it at the date of such cessation.

Nothing contained in the Plan nor in any Option granted pursuant to the

Plan shall confer upon any Participant any right with respect to continuance as

a director, officer, employee or consultant of the Corporation or any of its

subsidiaries or affiliates.

12.



DEATH OF PARTICIPANT

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



In the event of the death of a Participant, the Option previously granted

to him shall be exercisable only within the twelve months next succeeding such

death and then only:

(a) by the person or persons to whom the Participant's rights under the

Option shall pass by the Participant's will or the laws of descent and

distribution; and

(b) if and to the extent that the Participant was entitled to exercise the

Option at the date of the Participant's death.

13.



RIGHTS OF OPTIONEE

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



No person entitled to exercise an Option shall have any of the rights or

privileges of a shareholder of the Corporation in respect of any shares issuable

upon exercise of such Option until certificates representing such shares shall

have been issued and delivered.



14.



PROCEEDS FROM SALE OF SHARES

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



The proceeds from sale of shares issued upon the exercise of Options shall

be added to the general funds of the Corporation and shall thereafter be used

from time to time for such corporate purposes as the Committee may determine and

direct.

15.



ADJUSTMENTS

-----------



Appropriate adjustments in the number of common shares optioned and in the

option price per share, as regards Options granted or to be granted, may be made

by the Committee in its discretion to give effect to adjustments in the number

of common shares of the Corporation resulting subsequent to the approval of the

Plan by the Committee from subdivisions, consolidations or reclassification of

the common shares of the Corporation, the payment of stock dividends by the

Corporation or other relevant changes in the capital of the Corporation.

16.



TRANSFERABILITY

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



All benefits, rights and Options accruing to any Participant in accordance

with the terms and conditions of the Plan shall not be transferrable or

assignable unless specifically provided herein. During the lifetime of a

Participant any benefits, rights and Options may only be exercised by the

Participant.



17.



AMENDMENT AND TERMINATION OF PLAN

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



The Committee may, at any time, suspend or terminate the Plan. The board

may also at any time amend or revise the terms of the Plan, subject to

regulatory approval, PROVIDED that no such amendment or revision shall alter the

terms of any Options theretofore granted under the Plan.

18.



NECESSARY APPROVALS

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



The ability of the Options to be exercised and the obligation of the

Corporation to issue and deliver shares in accordance with the Plan is subject

to any approvals which may be required from the shareholders of the Corporation,

any regulatory authority or stock exchange having jurisdiction over the

securities of the Corporation. If any shares cannot be issued to any

Participant for whatever reason, the obligation of the Corporation to issue such

shares shall terminate and any Option exercise price paid to the Corporation

will be returned to the Participant.

19.



PRIOR PLANS

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



The Plan shall entirely replace and supersede prior share option plans, if

any, enacted by the Board of Directors of the Corporation or its predecessor

corporations and all stock options reserved for issuance or granted pursuant to

any such prior share option plans shall be deemed to be reserved for issuance or

granted pursuant to the provisions of the Plan.

20.



EFFECTIVE DATE OF PLAN

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



The Plan has been adopted by the Committee subject to the approval of any

stock exchange on which the shares of the Corporation are to be listed or other

regulatory body having jurisdiction and, if so approved, the Plan shall become

effective upon such approvals being obtained.



IN WITNESS WHEREOF the Corporation has caused its corporate seal to be

affixed hereto in the presence of its officers duly authorized in that behalf as

of the 20th day of June, 1997.

ABACAN RESOURCE CORPORATION



Per:/s/ Wade Cherwayko

----------------------------------Wade G. Cherwayko, President

Per:/s/ Derrick Armstrong

----------------------------------Derrick R. Armstrong, Secretary





STOCK OPTION AGREEMENT

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



THIS



AGREEMENT



made



effective



as



of



the



2nd



day



of



June,



1998.



BETWEEN:

_____________________,

as the "Optionee")

-



and



an individual residing in __________ (herein referred to



-



ABACAN RESOURCE

Alberta (herein



CORPORATION,

referred to



a body

as the



corporate, having an office in Calgary,

"Corporation")



WHEREAS:

1.

the Corporation is incorporated under the laws of the Province of

Alberta, having an authorized capital consisting of an unlimited number of

common shares without nominal or par value and an unlimited number of preferred

shares without nominal or par value;

2.

the

Corporation or



Optionee is an employee, consultant, officer or director of the

a wholly owned subsidiary of the Corporation;



3.

the Board of Directors of the Corporation has agreed to grant unto

the Optionee an option to purchase an aggregate of ______________

(__________________) common shares of its authorized unissued share capital in

consideration of the ongoing services and contributions to the Corporation or

subsidiaries of the Corporation by the Optionee or an associate or affiliate of

the Optionee; and

4.

Board



of



the granting of such option to the Optionee was authorized by the

Directors effective May 22, 1998;



NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the

premises and mutual covenants hereinafter set forth, and for other good and

valuable consideration, the receipt and sufficiency of which the parties hereto

have agreed as set forth herein.

ARTICLE I

DEFINITIONS

----------1.01

meanings:



In



this



Agreement



the



following terms shall have the following



(a) "Agreement", "herein", "hereto", "hereof" and similar expressions means

this Agreement, and includes any Agreement amending this Agreement or any

Agreement or instrument which is supplemental or ancillary hereof;

(b) "Board" means the board of directors of the Corporation;



(c) "Expiration Date" means _____________________;

(d) "Option Shares"

under a Share Option;



means the Shares the Optionee is entitled to purchase



(e) "Share" means a common share of the

date hereof;



Corporation



as constituted at the



(f) "Share

Option"

means an option to

purchase

________________

(______________) Treasury Shares from and after the applicable Vesting Date,

which are granted to the Optionee pursuant to this Agreement, and includes any

portion of that Option;

(g) "Treasury Share" means a theretofore unissued Share which is purchased

directly from the Corporation by or for the account of the Optionee; and

(h) "Vesting Date" means the date after which the respective Share Option

granted pursuant to this Agreement may be exercised, as more particularly set

forth in paragraph 2.01 hereof. No Share Option may be exercised prior to the

applicable Vesting Date thereof. Notwithstanding anything else contained herein,

if a "take-over bid", an "exempt take-over bid", "issuer bid" or an "exempt

issuer bid" is made in respect of the Shares of the Corporation or any class of

securities convertible or exchangeable into Shares of the Corporation, each of

the respective Vesting Dates shall be deemed to be amended to be the date upon

which the "offer to acquire" is made. The terms "take-over bid", "exempt

take-over bid", "issuer bid", "exempt issuer bid" and "offer to acquire" used

herein have the meanings ascribed to them in the Securities Act (Alberta).

1.02

In this Agreement, the masculine gender shall include the feminine

gender and the singular shall include the plural and vice versa wherever the

context requires.

ARTICLE II

SHARE OPTION

-----------2.01

The Corporation hereby grants to the Optionee, subject to the

terms and conditions hereinafter set out, an irrevocable and non-assignable

option to purchase at any time or from time to time after the respective Vesting

Date and on or before the Expiration Date,______________ (___________) common

shares of the Corporation, in instalments as set forth below:

(a) from and after the Vesting Date of ____________________, up to and

including the Expiration Date, the Optionee shall be entitled to purchase

_____________ (_____________) Option Shares at a price of Cdn. $______________

per common share; and

(b) from and after the Vesting Date of ______________________, up to and

including the Expiration Date, the Optionee shall be entitled to purchase

_______________

(__________________)

Option

Shares at a price of Cdn.

$_____________ per common share.

2.02

At 4:30 p.m., Calgary time, on the Expiration Date, the Share

Option shall forthwith expire and terminate and be of no further force or effect

whatsoever as to such of the Option Shares in respect of which the Share Option

hereby granted have not then been exercised.



ARTICLE III

CURRENCY DURING TERM OF EMPLOYMENT

---------------------------------3.0 (a) If prior to the Expiration Date, the Optionee's position as a

consultant to or a director, an officer or an employee of the Corporation or a

subsidiary of the Corporation, as the case may be, is terminated by reason of

the death of the Optionee, the Share Option may be exercised during the period

expiring the earlier of the Expiration Date or one year after such date of death

provided that the respective Vesting Date has occurred. In the event of the

Optionee's death, the rights of the Optionee under the Share Option may be

exercised by the person or persons to whom the Optionee's rights under the Share

Option shall pass by will or applicable law or, if no such person has such



right, by the Optionee's

limitations as aforesaid.



executors



or



administrators,



subject



to the time



(b) If prior to the Expiration Date, the Optionee's position as a

consultant to or a director, an officer or an employee of the Corporation or a

subsidiary of the Corporation, as the case may be, is terminated for any reason

other than the death of the Optionee, any Share Options that have vested to the

Optionee may be exercised during the period expiring the earlier of the

Expiration Date or thirty (30) days following the date of such termination.

ARTICLE IV

MATERIAL CHANGE

--------------4.01

In the event that, prior to the Expiration Date or exercise in

full of the Share Option, the outstanding share capital of the Corporation shall

be subdivided or consolidated into a greater or lesser number of Shares, or, in

the event of the payment of a stock dividend by the Corpora-tion, or in the

event that all of the shareholders of the Corporation are granted the right to

purchase additional Shares of the Corporation, the number and price of Option

Shares remaining subject to the Share Option hereunder shall be increased or

reduced accordingly, as the case may be.

4.02

If, prior to the Expiration Date or exercise in full of the Share

Option granted hereby, the Corporation shall, at any time arrange with or merge

into another corporation, the Optionee will thereafter receive, upon the

exercise of the Share Option, the securities or properties to which a holder of

the number of Shares then deliverable upon the exercise of the Share Option

would have been entitled upon such arrangement or merger, and the Corporation

will take steps in connection with such arrangement or merger as may be

necessary to assure that the provisions hereof shall thereafter be applicable,

in relation to any securities or property thereafter deliverable upon the

exercise of the Option granted hereby. A sale of all or substantially all of

the assets of the Corporation for consideration, (apart from the assumption of

obligations), consisting primarily of securities shall be deemed to be an

arrangement or merger for the foregoing purposes.

ARTICLE V

CHANGE OF CONTROL

----------------5.01



In



the



event



of:



(a) a change of control of the Corporation (as such term is customarily

used in the Securities Act, (Alberta) through ownership of its common shares,

including a "take-over bid", an "exempt take-over bid", "issuer bid" or an

"exempt issuer bid"; or



(b) a change in all or substantially

directors of the Corporation; or



all of the



members



of the Board of



(c) the Corporation merging, amalgamating or re-organizing

company that is not an affiliate of the Corporation; or

(d) the sale of all or

the Corporation

(a

to



substantially



with another



all of the assets or undertakings of



"Change of Control Event") all unvested Share Options shall immediately vest

the Optionee effective as of the date of the Change of Control Event.

ARTICLE VI



RESERVATION OF TREASURY SHARES

-----------------------------6.01

The Corporation shall at all times during the term of this

Agreement, reserve and keep available a sufficient number of Treasury Shares to

satisfy the requirements hereof.

ARTICLE VII

RESTRICTION ON ASSIGNMENT

------------------------7.01

The Share Option granted hereby are, insofar as the Optionee is

concerned, personal and non-assignable and neither this Agreement nor any rights

in regard thereto shall be transferable or assignable except upon the death of

the Optionee pursuant to Clause 3.01 hereof.

ARTICLE VIII

EXERCISE OF THE SHARE OPTION

---------------------------8.01

After the respective Vesting Date, the Share Option may be

exercised by the Optionee in accordance with the provisions hereof in whole or

in part, from time to time, by delivery of written notice of such exercise and

by tendering the pay-ment therefor in cash or by certified cheque to the

Corporation at its principal office or registered office in Calgary, Alberta.

Such notice shall state the number of the Option Shares with respect to which

the Share Option or Share Option are then being exercised. The Share Option

shall be deemed for all purposes to have been exercised to the extent stated in

such notice upon delivery of the notice and a tender of payment in full,

notwithstanding any delay in the issuance and delivery of the certificates for

the Shares so purchased.

8.02

Notwithstanding anything else to the contrary, Option Shares shall

always be granted and exercised in accordance with applicable securities

legislation, including the Securities Act of 1933, as amended, and the rules and

regulations thereunder.



ARTICLE IX

RIGHTS OF THE OPTIONEE PRIOR TO EXERCISE DATE

--------------------------------------------9.01

The Share Option herein granted shall not entitle the Optionee to

any rights whatsoever as a shareholder of the Corporation with respect to any

Shares subject to the Share Option until they have each been exercised in

accordance with Clause 8.01 and Option Shares have been issued as fully paid and

non-assessable.

ARTICLE X

FURTHER ASSURANCES

-----------------10.01

The parties hereto covenant that they shall and will from time to

time and at all times hereafter do and perform all such acts and things and

execute all such additional documents as may be required to give effect to the

terms and intention of this Agreement.

ARTICLE XI

INTERPRETATION

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



11.01

It is understood and agreed by the parties hereto that questions

may arise as to the interpretation, construction or enforcement of this

Agreement and the parties are desirous of having the Board of the Corporation

determine any such question of interpretation, construction or enforcement. It

is therefore understood and agreed by and between the parties hereto that any

question arising under the terms of this Agreement as to interpretation,

construction or enforcement shall be referred to the Board of the Corporation

and their majority decision shall be final and binding on both of the parties

hereto.

ARTICLE XII

ENTIRE AGREEMENT

---------------12.01

This Agreement supersedes all other agreements, documents,

writings and verbal understandings among the parties relating to the subject

matter hereof and represents the entire agreement between the parties relating

to the subject matter hereof.

ARTICLE XIII

ENUREMENT

--------13.01

Subject to the other provisions hereof, this Agreement shall

enure to the benefit of and be binding upon the parties hereto and their

respective heirs, executors, administrators, successors and permitted assigns.



13.02

This Agreement shall continue to constitute a binding obligation

of the Corporation notwithstanding any change of control of its voting

securities during the term hereof.

the



IN WITNESS WHEREOF the parties hereto have executed this Agreement as of

day and year first above written.



SIGNED AND DELIVERED

in the presence of:



)

)

)

)

)

)



- -----------------------------Witness



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



ABACAN RESOURCE CORPORATION

Per:

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







EX-11.1

34







EXHIBIT 11.1



COMPUTATION



OF



PER



SHARE



EARNINGS







Earnings (1)

12497000

- ---------------------------------------- ---------Shares Outstanding

114370836

- ---------------------------------------- ---------Shares Outstanding (Fully Diluted) (2)



125334953

----------



Basic Earnings per Share



$

0.11

----------



Basic Earnings per Share (Fully Diluted) $

0.11

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

(1)

Based on Canadian GAAP.

(2)

Consists of 9,764,117 exercisable stock options at prices ranging from

Cdn $0.28 to Cdn $12.15 per share; 600,000 options at $0.91 per share; 100,000

broker warrants at U.S. $7.50 per share and 500,000 broker warrants at $3.40 per

share.









EX-21.1

35







EXHIBIT 21.1

SUBSIDIARIES



1. DAHOMEY RESOURCE CORPORATION

2. LIBERTY TECHNICAL SERVICES LTD.

3. WEST AFRICAN RESOURCE CORPORATION

4. ABACAN RESOURCES (BENIN) LIMITED

5. ABACAN RESOURCES (DELTA) LIMITED

6. ABACAN TECHNICAL SERVICES LTD.

7. ABACAN POWER BENIN LIMITED

8. ABACAN RESOURCES (NIGERIA) LTD.

9. AGBARA RESOURCES LIMITED

10. ANGUS INTERNATIONAL RESOURCES LTD.

11. PROFILE INTERNATIONAL LTD.

12. ABACAN-ADDAX BENIN CONSORTIUM S.A.

13. ABACAN SERVICES (U.K.) LIMITED

14. ABACAN SERVICES (USA) LIMITED









EX-27.1

36









BAHAMAS

BAHAMAS

BAHAMAS

BAHAMAS

BAHAMAS

BAHAMAS

BAHAMAS

NIGERIA

BAHAMAS

BAHAMAS

BAHAMAS

BENIN

UK

TEXAS



5



THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABACAN

RESOURCES CORPORATION DECEMBER 31, 1998 FORM 10-KSB AND IS QUALIFIED IN ITS

ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.



1000



















































































-----END PRIVACY-ENHANCED MESSAGE-----





12-MOS

DEC-31-1998

JAN-01-1998

DEC-31-1998

3305

0

31

0

0

3336

92431

0

95809

9663

0

276750

0

0

(226679)

95809

12264

12445

0

26298

0

0

3022

12497

0

12497

0

0

0

12497

.11

.11