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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



SERVICE DEVELOPMENT AND PRODUCTION

CONTRACT

FOR



GAS FIELD

BETWEEN



NORTH OIL COMPANY OF THE REPUBLIC OF IRAQ

AND



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



SERVICE DEVELOPMENT AND PRODUCTION CONTRACT

FOR

GAS FIELD



TABLE OF CONTENTS



ARTICLE 1 – DEFINITIONS ...................................................................................................... 6

ARTICLE 2 – SCOPE OF CONTRACT ................................................................................. 12

ARTICLE 3 – TERM OF CONTRACT.................................................................................... 13

ARTICLE 4 – SIGNATURE BONUS ...................................................................................... 14

ARTICLE 5 – RELINQUISHMENT ......................................................................................... 14

ARTICLE 6 – MINIMUM WORK OBLIGATION ................................................................... 14

ARTICLE 7 – NOC’S ASSISTANCE...................................................................................... 15

ARTICLE 8 – TERMINATION.................................................................................................. 16

ARTICLE 9 – CONDUCT OF PETROLEUM OPERATIONS ............................................. 18

ARTICLE 10 – NATURAL GAS LIQUIDS AND SUPPLEMENTAL CRUDE OIL .......... 21

ARTICLE 11 – DEVELOPMENT PLANS AND WORK PROGRAMS.............................. 22

ARTICLE 12 – APPROVAL OF DEVELOPMENT PLANS AND WORK

PROGRAMS ............................................................................................................................... 24

ARTICLE 13 – JOINT MANAGEMENT OF PETROLEUM OPERATIONS..................... 26

ARTICLE 14 – DATA AND SAMPLES.................................................................................. 27

ARTICLE 15 – REPORTS AND RECORDS ......................................................................... 28

ARTICLE 16 – ACCESS AND INSPECTION ....................................................................... 28

ARTICLE 17 – MEASUREMENT, TRANSFER, AND DELIVERY OF PETROLEUM ... 29

ARTICLE 18 – VALUATION OF PETROLEUM ................................................................... 30

ARTICLE 19 – SERVICE FEES AND SUPPLEMENTARY FEES.................................... 30

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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 20 – BOOKS OF ACCOUNT, ACCOUNTING AND AUDIT ............................ 33

ARTICLE 21 – EXCHANGE AND CURRENCY CONTROL .............................................. 34

ARTICLE 22 – TITLE TO ASSETS ........................................................................................ 35

ARTICLE 23 – TAXES.............................................................................................................. 35

ARTICLE 24 – PARTNERSHIP, INDEMNITY AND INSURANCE.................................... 35

ARTICLE 25 – IMPORTS AND EXPORTS ........................................................................... 36

ARTICLE 26 – EMPLOYMENT, TRAINING, AND TECHNOLOGY TRANSFER .......... 37

ARTICLE 27 – PARTICIPATION ............................................................................................ 38

ARTICLE 28 – ASSIGNMENT ................................................................................................ 38

ARTICLE 29 – LAWS AND REGULATIONS ....................................................................... 39

ARTICLE 30 – LOCAL GOODS AND SERVICES .............................................................. 40

ARTICLE 31 – FORCE MAJEURE......................................................................................... 40

ARTICLE 32 – ENTIRE AGREEMENT AND AMENDMENTS .......................................... 41

ARTICLE 33 – CONFIDENTIALITY AND TECHNOLOGY OWNERSHIP ...................... 41

ARTICLE 34 – HEADINGS OF ARTICLES .......................................................................... 42

ARTICLE 35 – LANGUAGE .................................................................................................... 42

ARTICLE 36 – CONTRACTOR'S OFFICE IN THE REPUBLIC OF IRAQ...................... 42

ARTICLE 37 – GOVERNING LAW, CONCILIATION AND ARBITRATION ................... 43

ARTICLE 38 – NOTICES ......................................................................................................... 44

ARTICLE 39 – SIGNATURE, RATIFICATION AND EFFECTIVE DATE ........................ 44

ARTICLE 40 – WAIVER ........................................................................................................... 44

ARTICLE 41 – PROTECTION OF THE ENVIRONMENT................................................... 44

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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 42 – SITE RESTORATION AND DECOMMISSIONING .................................. 48

ARTICLE 43 – GENERAL BUSINESS ETHICS .................................................................. 49

ANNEX A – DESCRIPTION OF CONTRACT AREA .......................................................... 51

ANNEX B – MAP OF CONTRACT AREA............................................................................. 52

ANNEX C – ACCOUNTING PROCEDURE .......................................................................... 53

ANNEX D – DEFINITION OF RESERVOIRS ....................................................................... 64

ANNEX E – MINIMUM WORK OBLIGATION ...................................................................... 65

ANNEX F – FORMS OF GUARANTEE ................................................................................. 67

ADDENDUM ONE – HEADS OF JOINT OPERATING AGREEMENT............................ 69

ADDENDUM TWO – HEADS OF PETROLEUM TRANSFER AGREEMENT................ 73

ADDENDUM THREE – HEADS OF CHARTER OF JOINT OPERATING COMPANY. 76

ADDENDUM FOUR – HEADS OF EXPORT OIL SALES AGREEMENT ....................... 81



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



SERVICE DEVELOPMENT AND PRODUCTION CONTRACT

FOR



GAS FIELD



This Service Development and Production Contract ("Contract") is made and entered into

day of

2009 -, by and between:

this

North Oil Company, the Republic of Iraq (“NOC”) of the First Part, and

, a company established and existing under the laws of

having its registered head office at

(“

”) and

, a company established and existing under the laws of

, having its registered head office at

(“

”),

(individually a “Company”; and collectively the “Companies”); together with

North Gas Company, an Iraqi State company established and existing under the laws of Iraq

(hereinafter referred to as “State Partner”),

Companies and State Partner are collectively referred to as “Contractor”, of the Second

Part,

NOC and Contractor are referred to, individually, as “Party” or, collectively, as “Parties”.



WITNESSETH

WHEREAS all oil and gas resources within the territory and offshore areas of the Republic of

Iraq are owned by all the people of the Republic of Iraq, and the State of Iraq, as the sole

representative of the whole people, acting through the Iraqi Government, has sole right to

explore, develop, extract, exploit and utilize such natural resources therefrom; and

WHEREAS NOC, in its role as an Iraqi State oil and gas company, is exclusively entrusted

with and authorized for development and production of

Gas

Field;

in

accordance with the Law; and

WHEREAS

Contractor has sound financial standing, technical competency, and

professional skills to carry out Appraisal, Development and Production Operations and

generally all and any Petroleum Operations as defined herein; and

WHEREAS the Parties mutually represent that they have the power, authority, and desire to

enter into this Contract for the development and production of the

Gas

Field

as

defined herein;

NOW THEREFORE, and in consideration of the premises and the mutual covenants

hereinafter set out, it is agreed as follows:



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 1 – DEFINITIONS

Except as specifically provided herein, any reference to an Article, Annex, or Addendum

shall be construed as a reference to Article, Annex, or Addendum to this Contract. In this

Contract, including its Annexes and Addenda, words in the singular include the plural and

vice versa and except where the context otherwise requires, the following terms shall have

the meanings set out as follows:

1.1



"Accounting Procedure" means the accounting procedures and requirements set

out in Annex C.



1.2



"Affiliate" in relation to any Contractor’s entity, means:

(a)



a company which controls such entity, or



(b)



a company which is controlled by such entity, or



(c)



a company which is controlled by a company which controls such entity.



For the purpose of this definition, "control" means the power to dictate and conduct

the policy of a company through the control, directly or indirectly, of more than fifty

percent (50%) of the shares or voting rights in such company. For the purposes of

this Contract, subsidiaries of NOC as well as companies and enterprises of Iraq

Ministry of Oil or Iraq National Oil Company (when established) shall be deemed

NOC's Affiliates.

1.3



"Appraisal" or "Appraisal Operations" means any and all operations such as (but

not be limited to) geological, geophysical, aerial and any other surveys and any

interpretation of data relating thereto as may be contained in approved Work

Programs and Budgets and the drilling of such shot-holes, core holes, stratigraphic

tests, holes for the appraisal of Petroleum and other related holes and wells, the

production testing, PVT and core analyses and the purchase or acquisition of such

supplies, materials and equipment thereof, all as may be contained in approved Work

Programs and Budgets.



1.4



"Associated Gas" means Gas, occurring as gas-cap gas, which overlies and is in

contact with crude oil in a reservoir and/or solution gas dissolved in crude oil in a

reservoir.



1.5



“Barrel” means a liquid quantity consisting of forty-two (42) United States gallons

under a pressure of one (1) atmosphere and a temperature of sixty (60) degrees

Fahrenheit.



1.6



"Barrel of Fuel Oil Equivalent" or "BFOE" means, for the purposes of this Contract,

six thousand (6,000) SCF of Natural Gas.



1.7



"Barrel of Oil Equivalent" or "BOE" means, for the purposes of this Contract, one

Barrel of Crude Oil or six thousand (6,000) SCF of Natural Gas.



1.8



“Best International Petroleum Industry Practices” means all those uses and

practices that are, at the time in question, generally accepted in the international

petroleum industry as being good, safe, economical, environmentally sound and

efficient in exploring for, developing, producing, processing and transporting

Petroleum. They should reflect standards of service and technology that are either

state-of-the-art or otherwise appropriate to the operations in question and should be

applied using standards in all matters that are no less rigorous than those in use by

the Companies in other global operations.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



1.9



“BOD” means the Board of Directors formed pursuant to Article 9.3



1.10



"Budget" means the estimates of the expenditure expected to be incurred for

implementing an approved Work Program for any Calendar Year or part thereof.



1.11



"Calendar Month" or "Month" means in respect of any month in a Calendar Year, a

period commencing on the first day of such month and ending on the last day of the

same month.



1.12



"Calendar Quarter" or "Quarter" means a period of three consecutive Calendar

Months commencing on the first day of January, April, July, or October of any

Calendar Year.



1.13



"Calendar Year" means a period of twelve (12) consecutive months commencing

with the first day of January and ending on the last day of December, both dates

being inclusive, according to the Gregorian calendar.



1.14



“Capital Cost” means all costs and expenditure, excluding Operating Cost, as

defined in the Law.



1.15



“Cash Receipts” means as defined in Article 19.6.



1.16



"Commercial Production" means production of Gas from the Field (excluding

production for testing purposes) and delivery of the same at the relevant Transfer

Point under a program of regular production and sale.



1.17



“Company” means any entity that is a signatory party to this Contract and that forms

part of the Contractor, excluding the State Partner, and at any time thereafter shall

include their legal successors and permitted assignees.



1.18



"Companies" means, collectively, each Company that comprises the Contractor,

excluding the State Partner, and at any time thereafter shall include their legal

successors and permitted assignees.



1.19



“Contract" means this agreement between the Parties, including the Annexes and

Addenda attached hereto, as amended or supplemented from time to time in

accordance with this Contract.



1.20



“Contract Area” means the development and production area covered by this

Contract, as described in Annex A and outlined in Annex B.



1.21



"Contractor's Operator" means one of Companies designated as Operator as from

the Effective Date pursuant to Article 9.2.



1.22



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

Gregorian calendar and starting either on the Effective Date or any anniversary

thereof.



1.23



"Contractor" means, on the Effective Date, Companies and North Gas Company,

and at any time thereafter shall include their legal successors and permitted

assignees.



1.24



"Crude Oil" means, for the purposes of this contract, all hydrocarbons regardless of

gravity which may be additionally produced and saved from the Field in the liquid

state at absolute pressure of fourteen decimal six nine six (14.696) pounds per

square inch and sixty (60) degrees Fahrenheit, including asphalt and tar, but

excluding NGL that is not blended with Crude Oil.



1.25



“Data” means as defined in Article 14.2.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



1.26



“Date of Transfer of Operatorship” means the date on which the Joint Operating

Company (JOC) shall take over the conduct of Petroleum Operations pursuant to

ARTICLE 1 –9.4 and Addendum Three.



1.27



"Decommissioning Reserve Fund" means as defined in Article 42.2.



1.28



“Delivery Point” or “DP”, in relation to Gas or NGL, means the point(s) where NOC

shall receive the same from Transporter.



1.29



“Development Operations” means any and all operations, including primary and

subsequent (secondary, tertiary or other) recovery projects and pressure

maintenance, conducted with a view to developing the Field including, but without

limitations: the drilling, deepening, completing, plugging, side-tracking, re-completing

and equipping of evaluation and development wells; the engineering, building and

erecting or laying of production plants and facilities (such as, without limitation,

separators, compressors, generators, pumps and tankage, gathering lines, pipelines,

and all facilities required to be installed for production, pressure maintenance,

treatment, storage and transportation of Petroleum; the obtaining of such materials,

equipment, machinery, articles and supplies as may be required or expedient for the

above activities; and all auxiliary operations, activities and services required or

expedient for the better conduct or result of the above activities, all in accordance

with the approved Development Plan and Best International Petroleum Industry

Practices.



1.30



“Development Plan” or "Plan" means a scheduled program and cost estimate

specifying the Development Operations required for developing and/or increasing the

production capacity of the Field, which includes the Preliminary Development Plan,

Final Development Plan, and any subsequent Revisions thereof.



1.31



"Dinar" or "IQD" means the Iraqi Dinar.



1.32



"Dollar" or "USD" means the United States Dollar.



1.33



“Early Production Program” means as defined in ARTICLE 1 –2.1(a)(i).



1.34



"Effective Date" means the date upon which the signed contract becomes valid and

enforceable as notified by NOC to Contractor in writing, in accordance with the

provisions of ARTICLE 39 –.



1.35



"Early Production Target" means the Net Gas Production Rate, which shall be

targeted by Contractor within thirty (30) Months from the approval date of the

Preliminary Development Plan pursuant to Article 2.2(a)(i) and Article 6.



1.36



“Expenditure” means as defined in Article 19.4.



1.37



“Export Oil" means crude oil of a standard Iraqi export blend that is available for

possible lifting by Contractor at a Delivery Point as payment for Service Fees under

Article 19 and Addendum Four.



1.38



“Field” means the

Gas Field as initially defined in Annexes A, B, and D,

the areal limits of which shall be defined as and when the Appraisal Operations are

carried out, all within this Contract Area and subject to the provisions of Article 5

hereof.



1.39



"Final Development Plan" has the meaning given in Article 11.2(b).



1.40



"Financial Year" means the Calendar Year.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



1.41



"First Commercial Production" means the last day of the first thirty (30)

consecutive days when a Net Gas Production Rate of no less than seventy (70)

MMSCFD is produced and transferred to Transporter, but excluding any days on

which a production test is performed for establishing Commercial Production.



1.42



“Force Majeure” means as defined in Article 31.



1.43



"Gas" or "Natural Gas" means a mixture of hydrocarbons and varying quantities of

non-hydrocarbons that exist either in the gaseous phase or in solution with Crude Oil

in natural underground reservoirs and when produced remain in gaseous phase at

atmospheric conditions of temperature and pressure, and is classified as either

Associated Gas or Non-Associated Gas.



1.44



"Government" means the Government of the Republic of Iraq.



1.45



“Gross Negligence or Willful Misconduct” means any unjustifiable act or omission

which constitutes an intentional, deliberate reckless or conscious disregard of the

Best International Petroleum Industry Practices or terms of this Contract in

connection with Petroleum Operations.



1.46



“Joint Management Committee” or “JMC” means the committee formed pursuant to

ARTICLE 13 –.



1.47



“Joint Operating Company” or “JOC” means the company to be established in the

Republic of Iraq pursuant to Article 9 for taking over the conduct of Petroleum

Operations in accordance with Addendum Three.



1.48



“Law” means any constitution, law, decree, resolution, statute, ordinance, rule,

directive, order, treaty, code or regulation and any injunction or final non-appealable

judgment, as adopted, enacted, issued, promulgated or ratified by the Republic of

Iraq. Unless otherwise indicated, references to any Law shall be construed as a

reference to such Law as originally enacted, except as it is amended, re-enacted or

modified from time to time.



1.49



“LIBOR” or “London Inter-Bank Offered Rate” means the interest rate determined

as the arithmetic average (rounded upward to the nearest one thousandth of a

percentage point) of the offered rates for deposits in Dollars for a period of three (3)

months as published by the Financial Times (London Edition) on the date which is

one (1) business day prior to the beginning of the said three (3) months period

corresponding to each interest period. Should the Financial Times rate not be

published for a period of seven (7) consecutive days, the Wall Street Journal (New

York edition) shall be used.



1.50



"LPG" means liquefied Petroleum Gas, normally a mixture of Propane and Butane.



1.51



"MSCF" means one thousand (1,000) SCF.



1.52



"MMSCF" means one million (1,000,000) SCF.



1.53



“MMSCFD” means MMSCF per day.



1.54



“Minimum Expenditure Obligation” means that amount which shall be the minimum

amount to be spent by the Contractor as specified in Article 6.2.



1.55



“Minimum Work Obligation” means the minimum work commitment undertaken by

Contractor under Article 6, and Annex E.



1.56



"Natural Gas Liquids" or "NGL" means the propane and heavier (C3+) components



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



of Natural Gas that can be classified according to their vapor pressures; as low vapor

pressure (Condensate), intermediate vapor pressure (Natural Gasoline) and high

vapor pressure (LPG).

1.57



"Natural Gasoline" means the pentane and heavier (C5+) part of Natural Gas

Liquids with a vapor pressure intermediate between Condensate and LPG; having a

boiling point within the range of gasoline. It is liquid at atmospheric pressure and

temperature; but volatile and unstable; can be blended with other hydrocarbons to

produce commercial gasoline.



1.58



"Natural Gas Condensate" or "Condensate" is a mixture of hydrocarbon liquids that

are present as gaseous components in the raw Natural Gas produced from the Field.

It condenses out of the raw Gas if the temperature is reduced to below the

hydrocarbon dew point temperature of the raw Gas. It contains hydrocarbons that are

liquid at normal surface temperature and pressure. In the event Condensate is

produced from the Field and is blended with Crude Oil, then the provisions of this

Contract shall apply to such Condensate as if it were Crude Oil.



1.59



"Net NGL Production", over a certain period of time, means volume of NGL, actually

produced during the said period of time, saved and not used for Petroleum

Operations, treated to certain specifications as per the approved Preliminary

Development Plan, the Final Development Plan, or their Revisions, measured and

received by Transporter at the Transfer Point. Net NGL Production shall not,

however, include any NGL that becomes subject to an agreement relating to

Supplementary Crude Oil pursuant to Article 10.3.



1.60



"Net Gas Production", over a certain period of time, means all the Standard Cubic

Feet of Gas, actually produced during the said period of time, saved and not used for

Petroleum Operations, treated to certain specifications as per the approved

Preliminary Development Plan, the Final Development Plan, or their Revisions,

measured and received by Transporter at the Transfer Point(s) inclusive of Sales

Gas and Net NGL Production.



1.61



“Net Gas Production Rate”, in MMSCFD, means the Net Gas Production for a

certain period of time divided by the number of calendar days in that period of time.



1.62



"Non-Associated Gas" means Gas, which is found in a reservoir that does not

contain significant quantities of Crude Oil.



1.63



“Official Selling Price” or “OSP” means SOMO’s declared price for each of the Iraqi

crude oil blends.



1.64



"Operator" means the entity that is designated to conduct Petroleum Operations

under this Contract; being either the Contractor's Operator, or the Joint Operating

Company; all in accordance with Article 9 and Addendum Three.



1.65



"Operating Cost" means recoverable costs and expenses incurred and paid in

relation to Production Operations, in accordance with approved Work Programs and

Budgets and Accounting Procedure, Annex C.



1.66



"Participating Interest" means, in respect of each Contractor’s entity, the undivided

share expressed as a percentage for such party's participation in the rights, benefits,

privileges, duties, liabilities and obligations of Contractor.



1.67



"Performance Factor", for the purposes of Article 19.5, means the ratio of the Net

Gas Production Rate to the bid Plateau Production Target although in no event shall

it exceed 1.0.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



1.68



"Petroleum" means all hydrocarbons, including liquid and gaseous hydrocarbons,

produced and saved from the Contract Area.



1.69



"Petroleum Costs" means recoverable costs and expenditures incurred and

payments made by Contractor and/or Operator in connection with or in relation to the

conduct of Petroleum Operations (except corporate income taxes paid in the

Republic of Iraq or as otherwise stipulated herein) determined in accordance with the

provisions of this Contract and the Accounting Procedure in Annex C.



1.70



"Petroleum Operations" means any and all Appraisal, Development and Production

Operations and other activities related thereto, including abandonment operations, if

any, under this Contract.



1.71



“Plateau Production Period” means a period of seven (7) Years starting with the

earlier of three (3) years from the approval date of the Final Development Plan or the

date when the Plateau Production Target has been achieved for a continuous period

of thirty (30) days, but in no event earlier than the approval date of the Final

Development Plan and no later than six (6) years from the Effective Date.



1.72



"Plateau Production Target" is a bid parameter under this Contract and is the Net

Gas Production Rate that is to be achieved and sustained for the Plateau Period,

pursuant to Article 2.2(a)(ii).



1.73



"Preliminary Development Plan" has the meaning given in Article 11.2.



1.74



"Production Operations" means any and all operations related to production,

transportation and storage of Petroleum including (but not limited to) workovers,

stimulations, remediation, restoration, operating, staffing, supervising, repairing,

decommissioning and maintaining of any and all wells, plants, equipment, pipelines,

tank-farms, terminals and all other installations and facilities.



1.75



"Production Measurement Point" or “PMP” means the point, immediately upstream

of the Transfer Point, within or near the Contract Area where the Net Gas Production

or Net NGL Production are measured.



1.76



“Remuneration Fee Bid” or “RFB” means USD _________ (US$x.yy) per Barrel of

Fuel Oil Equivalent as utilized in Article 19.5.



1.77



"Revision", in respect of a Development Plan or Work Program and Budget, has the

meaning given in Article 12.4.



1.78



"R-Factor" is the ratio of cumulative Cash Receipts to cumulative Expenditures in the

conduct of Petroleum Operations pursuant to Article 19.5.



1.79



"Sales Gas" means dry Gas (predominantly methane (C1) and propane (C2))

remaining after extracting Natural Gas Liquids from raw Natural Gas.



1.80



"Standard Cubic Foot" or “SCF" when applied to Gas means the volume of Gas that

occupies one (1) cubic foot of space measured dry under an absolute pressure of

fourteen point six nine six (14.696) pounds per square inch and a temperature of

sixty (60) degrees Fahrenheit.



1.81



“State Partner” means the North Gas Company, an Iraqi State entity established and

existing under the Law.



1.82



“Sub-Contractor” means any company or person contracted by the Contractor or

Operator to provide goods or services with respect to Petroleum Operations.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



1.83



"Supplementary Crude Oil" means any Crude Oil that may be produced under a

separate agreement pursuant to Article 10 of this Contract.



1.84



“Supplementary Costs” means recoverable costs and expenditures incurred by

Contractor, other than those costs defined as Petroleum Costs in Article 19.4 and as

determined in accordance with the provisions of this Contract,



1.85



”Supplementary Fees” means those Supplementary Costs invoiced by Contractor

as defined in Article 19 and Annex C.



1.86



“Take or Pay” means as defined in Article 10.4.



1.87



"Tax" means Iraqi corporate income tax pursuant to Article 23.



1.88



"Tax Year" means the period of twelve (12) consecutive months according to the

Gregorian calendar for which tax returns or reports are required according to the

Law.



1.89



“Term” means the term of this Contract as defined in Article 3.2.



1.90



“Training, Technology and Scholarship Fund” or “Fund” means the fund

established as defined in Article 26.2.



1.91



"Transfer Point" or "TP" means the inlet flange(s) of the outgoing pipeline from the

Production Measurement Point where Transporter shall receive Net Gas Production

or Net NGL Production from Operator for transportation to the Delivery Point.



1.92



"Transporter" means the entity designated by NOC to operate the Transportation

Facilities and Transportation System for transporting Sales Gas, Condensate,

Natural Gas Liquids, or LPG from the Transfer Point(s) to the Delivery Point(s)

pursuant to Article 17 and Addendum Two.



1.93



“Transportation Facilities” means the pipelines, pumps, compressors, tanks,

meters, and other transportation facilities that are built by Operator beyond the

Transfer Point(s) for transporting Sales Gas, Condensate, Natural Gas Liquids, or

LPG and integrated into the Transportation System pursuant to this Contract.



1.94



"Transportation System" means, at any time, any and all Transportation Facilities

beyond the Transfer Point, including all the facilities under control of Transporter,

which are necessary for transportation, storage, metering and delivery at the relevant

Delivery Point.



1.95



"Work Program" means an itemization and time schedule of the Petroleum

Operations to be carried out under this Contract.



1.96



"Year" means a period of twelve (12) consecutive Months according to the Gregorian

calendar; starting on some date or any anniversary of the date.

(End of Article 1)



ARTICLE 2 – SCOPE OF CONTRACT

2.1



This Contract is a service type Gas Field Development and Production Contract for

the __________ Gas Field, in accordance with the provisions herein. It includes 43

Articles, Annexes A, B, C, D, E, and F, and Addenda One, Two, Three, and Four; all

attached hereto and made part hereof. In the event of a conflict between this

Contract Articles and the Annexes or Addenda, the provisions of the Articles shall

prevail. Any reference to an Addendum herein shall be deemed to include the fully-



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



termed agreement which replaces such Addendum, unless the context requires

otherwise.

2.2



Contractor, subject to the provisions herein contained and in accordance with Best

International Petroleum Industry Practices, shall:

(a)



provide or arrange to provide services and technologies for conducting

Petroleum Operations with the intention to achieve the production targets set

out below, which may be revised in accordance with approved Development

Plans:

(i)



the Early Production Target at a Net Gas Production Rate equal to

twenty-five percent (25%) of the Plateau Production Target as soon as

possible but no later than thirty six (36) months from the approval date

of the Preliminary Development Plan; and



(ii)



(

the Plateau Production Target at a Net Gas Production Rate of

) MMSCFD for the Plateau Period that was bid by the Company(s). ..



(b)



provide or arrange to provide all capital, machinery, equipment, technology,

personnel and services necessary for conducting Petroleum Operations;



(c)



incur all costs and expenses required for carrying out Petroleum Operations in

accordance with approved Development Plans, Work Programs and Budgets

in order to achieve the production targets set out in this Article 2; and



(d)



fulfill all financial and other obligations of Contractor and enjoy all rights and

benefits, in accordance with the provisions of this Contract.



2.3



For a period of six (6) years from the Effective Date Contractor shall have the

exclusive right to negotiate a separate agreement to explore for and develop the

undiscovered potential reservoirs, as defined in Annex D. If no such agreement is

reached in this time period, NOC shall be free to explore and develop such reservoirs

in any manner it may deem appropriate, taking care not to hinder or unduly interfere

with Petroleum Operations.



2.4



In the event of unintentional infringement on the undiscovered reservoirs, the Parties

shall convene to agree in good faith on a proper course of action, taking into

consideration the quantities of petroleum involved, safeguarding the interests of both

Parties.



2.5



At any time, the Companies shall be jointly and severally liable to NOC for all

obligations of Contractor under this Contract.

(End of Article 2)



ARTICLE 3 – TERM OF CONTRACT

3.1



The Contract shall come into force on the Effective Date.



3.2



The basic term of this Contract ("Term") shall be twenty (20) years from the Effective

Date. The Term is extendable pursuant to Article 31 and elsewhere in this Contract.



3.3



No later than one (1) Year prior to this Contract’s expiry date, Contractor may submit

a written request to NOC for an extension of the Term for a maximum period of five

(5) Years, subject to newly negotiated terms and conditions.

(End of Article 3)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 4 – SIGNATURE BONUS

4.1



Within thirty (30) days from the Effective Date the Companies shall deposit in cash, in

USD

USD, into a bank account designated by NOC a signature bonus of

(US$XXX,000,000).



4.2



The signature bonus paid shall be considered Supplementary Costs and shall be

recovered pursuant to and in accordance with Article 19.2(a).

(End of Article 4)



ARTICLE 5 – RELINQUISHMENT

5.1



Contractor shall relinquish to NOC within three (3) Years from the initial approval

date of the Final Development Plan any reservoir(s) not included in an approved

Final Development Plan.



5.2



Contractor shall relinquish to NOC within six (6) Years from the approval date of the

Final Development Plan any reservoir(s) included therein if Development Operations

in respect of such reservoir(s) have not commenced in accordance with the Final

Development Plan.



5.3



NOC shall be free to appraise, develop and produce relinquished reservoir(s) taking

care not to hinder or unduly interfere with Petroleum Operations.

(End of Article 5)



ARTICLE 6 – MINIMUM WORK OBLIGATION

6.1



6.2



Contractor shall provide or arrange to provide all the required services, within the

respective periods of time and according to the provisions set out in Annex E, to fulfill

the Minimum Work Obligation specified therein, for the following activities:

(a)



preparation of the Preliminary Development Plan and the Final Development

Plan;



(b)



conduct of seismic surveys, including processing and interpretation thereof;



(c)



conduct of detailed geological and reservoir engineering studies, including (3D) simulation for the reservoirs programmed to come into early production;



(d)



drilling appraisal and/or development wells with the aim of appraising the

reservoirs defined in Annex D, and achieving planned initial production in

accordance with the Early Production Program;



(e)



conduct of detailed laboratory and reservoir engineering studies to evaluate

most suitable secondary recovery mechanisms for the reservoirs

programmed to come into production within the Final Development Plan; and



(f)



performing engineering studies and building all necessary surface installations

required for initial production, transportation, and initiation of engineering work

and infrastructure facilities required by the Final Development Plan.



Contractor shall spend a minimum amount of __________million USD (US$

xxx000000) in the course of implementing the Minimum Work Obligation specified in

Annex E. The Minimum Expenditure Obligation shall be deemed to have been met



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



provided that the Minimum Work Obligations under Annex E are fulfilled.

6.3



Notwithstanding Article 6.2, the Contractor shall invest the sums consistent with the

amounts and timing contemplated in approved Development Plans, subject to the

terms and conditions set forth in this Contract.



6.4



The performance of each Company and the fulfillment of its contractual and financial

obligations under this Contract shall be guaranteed by an Affiliate with net production

in excess of 250,000 Barrels of Oil Equivalent per day or its ultimate parent company

through an instrument in the form set out in Annex F. Such guarantee shall be

effective as of the Effective Date and shall be delivered to NOC on the date of

execution hereof in respect of Companies, and as provided in Article 28 in respect of

assignees.



6.5



Ministry of Oil shall provide to Companies a guarantee through an instrument

substantially in the form set out in Annex F, to guarantee the performance of the

State Partner, NOC, SOMO, and any other Iraqi State entity and their fulfillment of

their respective contractual and financial obligations under this Contract.



6.6



Substantial failure of Contractor to perform timely the levels of investment and work

contemplated in an approved Development Plan shall lead to Contract termination in

accordance with the provision of Article 8.

(End of Article 6)



ARTICLE 7 – NOC’S ASSISTANCE

NOC shall:

7.1



provide Contractor with such pertinent technical data, if any, (in addition to

information provided to Companies during the bidding process) which may become

available from time to time, to be used exclusively for Petroleum Operations;



7.2



ensure that the Contract Area, including all other areas where Petroleum Operations

are required under this Contract, shall be free of any mines or hazardous war

remnants and free of any claims by third parties. However, in the event a clearing

operation is found necessary, Contractor shall prepare the same in close consultation

with NOC prior to submission to the JMC for approval. Once the plan is approved by

the JMC, Contractor shall execute the de-mining work program through competent

service providers and fund the related cost, which costs shall be considered as

Supplementary Costs and recovered pursuant to Article 19;



7.3



provide adequate security, through the Iraqi armed forces, within the Contract Area

and any other areas in the Republic of Iraq in which Petroleum Operations or

operations related to the Transportation Facilities are conducted including during

travel to and from such areas. NOC shall be solely liable for the conduct of all

operations by the Iraqi armed forces and Contractor shall not have any liability or

obligation to any party for any acts or activities of the Iraqi armed forces or be obliged

to reimburse NOC for the cost and expense of providing security as contemplated

herein. However, in the event that the Contractor can demonstrate that the security

being provided is inconsistent with its HSE policies, the Parties shall agree

supplementary measures, including short-term engagement of competent private

Iraqi security providers, such costs being considered Petroleum Costs;



7.4



provide such assistance to Contractor and Operator as may reasonably be required

to secure and renew all entry visas or work permits for employees of Contractor and

Operator or Sub-Contractors and their dependents, all permits and registrations



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



required for Contractor to open and maintain a branch office in the Republic of Iraq,

all customs and other clearances required for imports and exports of equipment and

supplies required for Petroleum Operations, and assist Contractor and Operator in

obtaining the office space, its equipment, accommodation, communication facilities

and permits, way-leaves, easements, rights of way, licenses and renewals thereof, all

for the purpose of conducting Petroleum Operations;

7.5



provide Contractor and Operator free of charge:

(a)



access to the Contract Area including the existing roads and bridges leading

to it and other areas where Petroleum Operations are required;



(b)



access to and use of water, including water for injection within or outside the

Contract Area for the purpose of Petroleum Operations, provided that all

installations for off-take, treatment, distribution, and disposal of water shall be

the responsibility of Operator;



(c)



use of Petroleum for Petroleum Operations; and



(d)



use of existing wells and facilities related to the Field within the Contract Area.



and

7.6



in the event of unintentional infringement on petroleum operations of either Party, the

Parties shall convene to agree in good faith on a proper course of action,

safeguarding the interests of both Parties.

(End of Article 7)



ARTICLE 8 – TERMINATION

8.1



Termination by NOC

(a)



NOC may terminate this Contract: (i) by giving Contractor written notice if the

last remaining Company (or its parent company that provides a guarantee),

becomes bankrupt or be declared insolvent: or (ii) by giving Contractor three

(3) months written notice if Contractor commits a breach of a material

obligation of this Contract, including but not limited to:

(i)



Contractor knowingly submits a false statement to NOC which is of

material consideration for the execution of this Contract;



(ii)



last remaining Company assigns any interest, right or obligation under

this Contract contrary to the provisions of Article 28; and



(iii)



Contractor fails substantially to comply with approved Development

Plans, Work Programs or Budgets.



(b)



If Contractor has remedied its breach pursuant to (a) within the three (3)

months’ notice period, NOC shall consider the notice as having been

ineffective. If NOC reasonably believes that Contractor is doing its best to

remedy the breach and its efforts look promising, then NOC may extend the

notice period accordingly.



(c)



If NOC terminates this Contract in accordance with Article 8.1(a), Contractor

shall:

(i)



forfeit all its rights and interests under this Contract as from the date of



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



termination;



8.2



(ii)



release NOC from any and all actions, claims, demands and

proceedings that may arise out of such termination; and



(iii)



pay NOC any unspent portion of the Minimum Expenditure Obligation.

Otherwise, NOC shall be entitled to recover such balance from

Contractor by any means it may deem proper.



(d)



If Petroleum Operations are suspended or substantially curtailed for a period

exceeding eighteen (18) consecutive Months due to Force Majeure (but for

reasons other than legislation/order of Government), either NOC or

Contractor may terminate this Contract after giving the other Party two (2)

months written notice. Upon such termination, the provisions of Articles

8.1(c)(i) and Article 8.1(c)(ii) shall apply, and NOC shall compensate

Contractor for accrued but unpaid Service Fees and Supplementary Fees up

to the date of termination.



(e)



If Contractor suspends its obligations in respect of Petroleum Operations by

order or decree of the government of any of the Companies, NOC shall have

the right to assume full responsibility for Petroleum Operations in any way it

deems appropriate after giving Contractor one (1) month written notice to this

effect. However, if such suspension continues for a period exceeding one (1)

Year, NOC shall have the right to terminate this Contract after giving

Contractor two (2) months written notice. Upon such termination, the

provisions of Article 8.1(c) shall apply, and Contractor shall be entitled to no

compensation whatsoever. However, if at any time during the period when

Contractor has suspended its obligations and prior to the end of the

termination notice, Contractor gives NOC notice that it is able and willing to

resume its obligations with respect to Petroleum Operations, NOC and

Contractor shall agree on the best course of action to resume Contractor's

obligations and on the payment by NOC of any outstanding Service Fees and

Supplementary Fees that were due and payable to Contractor prior to the

period of suspension. It is understood that Contractor shall not be entitled to

any Service Fees during the period of suspension.



(f)



If Contractor fails to establish a normal presence in the Republic of Iraq, as

manifested by the necessary personnel and equipment required to conduct

Petroleum Operations within six (6) months after the approval date of the

Preliminary Development Plan, and in due consideration of Article 31.5, NOC

shall have the right to terminate this Contract after giving Contractor two (2)

months written notice. Upon such termination, the provisions of Article 8.1(c)

shall apply, and Contractor shall be entitled to no compensation whatsoever.



Termination by Contractor

If Contractor elects to terminate this Contract before the end of its Term, Contractor

shall give NOC three (3) months written notice to this effect giving reasons for such

election. If by the end of the said notice period the Parties have not agreed on a

course of action other than termination, then Contractor may terminate this Contract

after giving NOC a further notice of one (1) month. Upon such termination, the

provisions of Article 8.1(c) shall apply.



8.3



In the event of termination of this Contract (whether by NOC or by Contractor), in

accordance with this Article 8, Contractor hereby warrants that it shall not obstruct,

hinder or otherwise interfere with Petroleum Operations.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



8.4



The provisions of this Contract that by their nature survive termination or expiry of

this Contract (including indemnities, liabilities, audit, confidentiality, governing law

and arbitration) shall remain in full force and effect for a period of three (3) Years

after such termination or expiry.

(End of Article 8)



ARTICLE 9 – CONDUCT OF PETROLEUM OPERATIONS

9.1



Until NOC opts for the formation of a JOC, pursuant to Article 9, Contractor's

Operator shall conduct Petroleum Operations under the general supervision and

control of a JMC formed pursuant to Article 13. In the event that permission is

granted to third parties to operate within the Contract Area such as for operations

that are not related to Petroleum Operations, operations involving reservoir(s) that

are excluded under Article 2.2 or that have been relinquished pursuant to Article 5, or

sole-risk operations under Article 12.6, NOC shall take necessary measures to

ensure that such operations within the Contract Area shall not obstruct, hinder, or

unduly interfere with Petroleum Operations.

NOC shall indemnify and hold

Contractor harmless of any damage, cost, or delay caused by or resulting from any

such third party operations.



9.2



Contractor appoints _________ to serve as Contractor's Operator to conduct

Petroleum Operations in the absence of the JOC. In the event of the creation of a

JOC, and as from the Date of Transfer of Operatorship, Contractor's Operator shall

continue to share management and activities of the JOC for the efficient and smooth

conduct of Petroleum Operations.



9.3



Contractor shall not change the Contractor's Operator without the prior written

consent of NOC.



9.4



At any time after Contractor first achieves an R-Factor equaling or exceeding one

point zero (1.0), pursuant to Article 19.5, NOC shall have the option to call for the

formation of a Joint Operating Company, which shall be jointly owned and managed

by the Parties. The JOC shall serve as Operator and conduct Petroleum Operations

on behalf of the Parties, under the general supervision and control of a Board of

Directors in accordance with this Contract and Addendum Three, and all in

accordance with approved Development Plans and Work Programs and Budgets.



9.5



Within twelve (12) Months of NOC's decision for the formation of the JOC, the Parties

shall establish the JOC consistent with the JOC Heads of Agreement which are set

out in Addendum Three, and consistent with the Law.



9.6



The Parties shall agree in due time to a plan and a procedure for the transfer of

Operatorship from Contractor's Operator to the JOC, taking into consideration that

the transfer plan shall include but not be limited to:

(a)



an arrangement for the establishment of the JOC;



(b)



a list of the various positions to be taken over by the JOC;



(c)



a schedule of transfer stages which culminates in the completion of the

transfer within twelve (12) months of the date on which the JOC comes into

existence pursuant to Article 9.4; and



(d)



inventories of the relevant facilities, equipment, documents, manuals, data

and information necessary for the Petroleum Operations.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



9.7



Contractor's Operator shall, in accordance with the transfer schedule, transfer to the

JOC control of all facilities and equipment relating to Petroleum Operations and all

documents, manuals, data and information regarding the use and operation of such

facilities and equipment so that the JOC personnel are able to manage and handle

such facilities and equipment in accordance with the Best International Petroleum

Industry Practices.



9.8



The transfer of the accounting and financial aspects shall be handled in accordance

with Annex C.



9.9



During the preparations for the transfer of Operatorship to the JOC and in the course

of the actual transfer, Contractor's Operator shall perform the functions and fulfill the

obligations provided for in this Contract in respect of Petroleum Operations.

Thereafter, the functions, obligations and rights of the Operator provided for in this

Contract shall, by analogy, be applicable to the JOC in accordance with the

provisions of this Contract and Addendum Three.



9.10



After the JOC has taken over conduct of Petroleum Operations and has become

Operator, Contractor shall continue to have the obligation of joint management of

JOC and a major role in all the planning, decisions, surveillance, and day-to-day

conduct of Petroleum Operations. In general, Contractor shall make available its

managerial and technological skills and personnel to JOC to ensure that Petroleum

Operations are performed in accordance with the Best International Petroleum

Industry Practices. In particular, Contractor shall continue to prepare and submit for

NOC's approval annual Work Programs and Budgets, Development Plans, and their

Revisions. The establishment of the JOC shall in no way relieve Contractor of its

obligations to achieve the production targets under this Contract.



9.11



Expenses directly incurred by NOC and approved by the JMC in the set-up, transfer

and takeover of Petroleum Operations by the JOC shall be paid by Contractor and

charged to the Operating Account in accordance with the provisions of Annex C. It is

understood that any commitments entered into by NOC prior to the Effective Date

that cover activity specified in the Minimum Work Obligation shall be honored and

funded by Contractor, which funding shall be Petroleum Costs. However, Contractor

shall have the right to review these commitments and, following consultation with the

ROC, may terminate such commitments subject to the provision of suitable

alternative arrangements.



9.12



Not later than the twentieth (20th) day of each Calendar Month, the Operator shall

furnish Contractor with a detailed written estimate of its total cash requirements for

the succeeding Calendar Month expressed in Dollars, in accordance with approved

Work Programs and Budgets.

Such estimate shall take into consideration any cash expected to be on hand at

Calendar Month end. Payment by Contractor for the succeeding Calendar Month

shall be made directly to the correspondent bank designated in Article 9.13 below on

the first (1st) day of the Month, or the next following working day, if such day is not a

working day.



9.13



Operator is authorized to keep at its own disposal abroad, in an account opened with

a first class independent bank, the foreign funds advanced by Contractor. Interest or

similar income generated by the account shall be credited to the account.

Withdrawals from said account shall be used for payment for goods and services

abroad and for transferring to a local bank in the Republic of Iraq the required

amounts to meet expenditures in Dinars for the Operator in connection with

Petroleum Operations, converted at the applicable rate of exchange available as

published by the Iraqi Central Bank on the date of conversion. Within 60 (sixty) days



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



after the end of each Financial Year, Operator shall submit to the appropriate

exchange control authorities in the Republic of Iraq a statement, duly certified by a

recognized firm of independent auditors, showing the funds credited to the account,

the disbursements made out of the account and the balance outstanding at the end

of such Financial Year.

9.14



Operator shall diligently conduct Petroleum Operations in compliance with the Law,

and in accordance with Best International Petroleum Industry Practices.



9.15



Operator's activities aboveground and underground shall be designed to achieve

efficient and safe production of Petroleum from the Field. Operator shall ensure that

all materials, equipment, and facilities used in Petroleum Operations comply with

generally accepted engineering norms, are of proper and acceptable construction,

and are kept in good working order throughout the Term. The Parties shall at least

one (1) Year before the expiry of this Contract agree on a detailed procedure for

handing-over the Field and related facilities to NOC as a going concern.



9.16



Operator shall take all appropriate and necessary measures, in accordance with the

Law, to safeguard the environment and prevent pollution which may result from

Petroleum Operations, and to minimize the effect of any pollution which may occur.



9.17



Each of Contractor and Operator shall take all appropriate and necessary measures,

in accordance with the Law, to ensure transparency, accountability and the strict

observance of general business ethics.



9.18



Operator shall conduct Petroleum Operations in accordance with the provisions of

this Contract under the general supervision and control of the JMC or BOD, as the

case may be.



9.19



Operator shall:

(a)



provide all personnel required for the Petroleum Operations, giving first

priority to Iraqi nationals, provided the Iraqi nationals have the required

qualifications and experience;



(b)



without prejudice to the Contractor’s right to occupy positions in the JOC,

adhere to employment and training programs which shall aim at the

Iraqization of Operator’s manpower; all pursuant to a plan to be submitted by

the Operator for approval by the JMC or BOD no later than six (6) years from

the Effective Date;



(c)



utilize Sub-Contractors and suppliers of proven capability and professional

experience on a competitive basis and in accordance with the tendering

procedures established pursuant to Article 9.21(c), keeping the JMC or BOD

informed accordingly. Any purchase order and sub-contract shall be in

accordance with approved Work Programs and Budgets;

However, prior approval shall be obtained before the award of any individual

purchase order or sub-contract, giving details of bids received and the basis

for the recommended award, as follows:

(i)



by JOC for awards up to twenty million USD (US$20,000,000) in

value;



(ii)



by JMC or BOD for awards up to fifty million USD (US$50,000,000) in

value; and



(iii)



by NOC for awards exceeding fifty million USD (US$50,000,000) in



20



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



value.

and

(d)



prepare and issue reports pursuant to Article 15, and provide any further

information as may reasonably be required by NOC.



9.20



Operator shall place fixtures and installations inside and outside the Contract Area as

necessary to carry out Petroleum Operations, in accordance with the approved

Development Plans. Transportation Facilities that are integrated into the

Transportation System shall be handed over upon completion and commissioning to

the Transporter, which will thereafter be responsible for the operation and

maintenance thereof, in accordance with the provisions of Addendum Two and the

subsequent Petroleum Transfer Agreement.



9.21



Promptly after the Effective Date, but not later than six (6) months thereafter,

Operator shall prepare and submit for JMC or BOD approval, in accordance with

Article 12, the following operating procedures:

(a)



employment procedures and personnel regulations for locally recruited

personnel including scales of salaries, wages, benefits, and all allowances

applicable to the respective grade of staff and employees, together with

employment requirements such as standard job descriptions and

qualifications to fill the jobs, all in accordance with the Law and local market

conditions. Equitability of basic salaries and terms of employment between

Iraqis and non-Iraqis of similar qualification and experience shall be observed,

with allowances and special benefits as appropriate for non-Iraqis;



(b)



benefits and allowances to be paid in the Republic of Iraq to assigned

personnel referred to in Annex C during the assignment for Petroleum

Operations;



(c)



tendering, bidding and contract awarding procedures for engineering, drilling,

construction and other service contracts, and procedures for purchasing

materials and equipment, all on a competitive basis, taking into account

provisions of this Contract Best International Petroleum Industry Practices

and the Law; and



(d)



detailed accounting system to be adopted by Operator based on the

provisions of Annex C.

(End of Article 9)



ARTICLE 10 – NATURAL GAS LIQUIDS AND SUPPLEMENTAL CRUDE OIL

10.1



It is understood that this Contract is limited to the Appraisal, Development and

Production of Non-Associated Gas reservoirs including, where required, the

treatment and processing of the Natural Gas to produce NGLs. However, pursuant to

a separately negotiated agreement the NOC may request Contractor to explore for

and, if successful, appraise, develop and produce any potential Crude Oil

accumulations.



10.2



In the absence of such separate agreement within the period set forth in Article 5,

NOC reserves the right thereafter to explore, appraise, develop, and produce such

Crude Oil accumulations, directly or through third parties, ensuring that Petroleum

Operations are not hindered or delayed.



21



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



10.3



Unless included in any agreement relating to Supplementary Crude Oil entered into

pursuant to Article 10.2, the Remuneration Fee for NGL resulting from activities

under this Contract shall be payable as a part of the Remuneration Fee for Net Gas

Production, in accordance with Article 19.



10.4



Should there be any unavoidable delay on the part of the Transporter or NOC in

receiving the produced Gas and any associated NGL, the Parties may agree in a

timely manner on a reasonable holding period, and the Term together with all rights

and obligations hereunder shall be extended accordingly, subject to the provisions of

Article 8. With or without the said holding period, the Parties may separately agree an

alternative off-take arrangement. Failing agreement on the holding period or the

alternative off-take arrangement, Contractor shall receive its due and payable

Service Fees and, subject to Article 19.3(d), Supplementary Fees on the basis of

Take or Pay arrangements until such time NOC is able to receive the full Net Gas

Production and Net NGL Production.



10.5



The Take or Pay arrangements shall compensate the Contractor only to the extent of

Service Fees and, subject to Article 19.3(d), Supplementary Fees that would have

been expected should the delay not have taken place. Contractor will have the

obligation to demonstrate in a manner consistent with certification procedures normal

in such circumstances that wells and facilities are capable of producing and handling

the volumes contemplated in the Development Plan.



10.6



In no event will the Take or Pay arrangements cover Service Fees or Supplementary

Fees for Net Gas Production in excess of the Plateau Production Target.



10.7



At such time as the necessary receiving facilities are made available by Transporter

or NOC, should Contractor not be able to deliver the Net Gas Production paid for

under the Take or Pay arrangements then the Service Fees and Supplementary

Fees payable shall be recalculated as if such lower deliverability had existed since

the start of the Take or Pay arrangements and the Contractor shall immediately

repay all excess payments received.



10.8



On termination of the Take or Pay arrangements Contractor and NOC will agree

arrangements such that Contractor does not benefit under this Contract to a greater

extent than it would have done had implementation of the Take or Pay arrangements

not been necessary.



(End of Article 10)

ARTICLE 11 – DEVELOPMENT PLANS AND WORK PROGRAMS

11.1



Contractor and Operator are obligated to develop the Field and maintain the required

delivery capacities in accordance with the approved Development Plans and terms of

the Petroleum Transfer Agreement; heads of which are set out in Addendum Two.



11.2



Promptly after the Effective Date, and in any case not later than six (6) months

thereafter, Contractor shall prepare the Preliminary Development Plan, presenting, in

the light of the available knowledge of the Field, the overall targets and phases of

development of the Field for the Term, as well as specific Petroleum Operations

related to additional Appraisal Operations and initial production from the Field. The

Preliminary Development Plan shall include:

(a)



an "Early Production Program" for the Field designed to achieve the Early

Production Target as soon as possible but no later than thirty six (36) months

from the approval date of the Preliminary Development Plan;



22



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



11.3



(b)



an "Appraisal Program" for the reservoir(s) of the Field which require and

justify further Appraisal Operations, including a time schedule for geophysical

surveys and any interpretations of data relating thereto, geological and

reservoir engineering studies, as well as laboratory work and Field data

gathering programs. The Appraisal Program is aimed at acquiring technical

data required to conceive the Final Development Plan embracing the whole

Field; and



(c)



a Work Program and Budget for the remainder of the current Calendar Year.



Contractor shall prepare and submit for approval annual Work Programs and

Budgets, including production schedules for the succeeding Calendar Years, not later

than the first of October of each Calendar Year.

Each annual Work Program and Budget shall set out in detail by Quarter all aspects

of proposed Petroleum Operations to be carried out including all relevant data and

information, the estimated cost and duration of each operation, the estimated

monthly rate of production for each reservoir of the Field and all other relevant data

and information. The Work Program and Budget shall also include a forecast of

Yearly activities for the four (4) Year period following the end of the relevant Calendar

Year or the period up to the expiry of this Contract whichever is shorter.



11.4



Within six (6) months after the completion of the Appraisal Program, Contractor shall

prepare the Final Development Plan, which shall, upon approval by NOC, supersede

the Preliminary Development Plan.



11.5



Contractor and Operator shall conduct Petroleum Operations in a manner that is

designed to achieve the Plateau Production Target within three (3) Years of the

approval date of the Final Development Plan, but no later than six (6) Years after the

Effective Date. Development Plans submitted by Contractor for approval must

contemplate achieving the Plateau Production Target within such time period.



11.6



Contractor shall prepare and submit for NOC’s approval revised Development Plans

and corresponding cost estimates as necessary.



11.7



All Plans and production schedules shall be based on sound geological, reservoir,

engineering and economical principles, all in accordance with the Best International

Petroleum Industry Practices, and with the objective of optimizing production and

maximizing the volume of recoverable reserves of Petroleum from the Contract Area.



11.8



Development Plans shall include as a minimum the following:

(a)



details of the proposed development area;



(b)



summary of reservoir studies;



(c)



proposals relating to additionally required Field Appraisal, if any;



(d)



proposals relating to the spacing, drilling and completion of wells and the

surface facilities, installations and pipelines required for the production,

treating, transportation, processing, and delivery of Natural Gas and any

associated NGL;



(e)



forecast of annual production and an estimate of relevant investments

involved; and



(f)



a description of Gas sales and purchase agreement or other off-take

arrangements, including the principal terms of such arrangements, the



23



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



relevant Transfer and Delivery Point(s), and any Transportation Facilities to

be constructed.

11.9



In the event that the Gas sales and purchase agreement or other off-take

arrangements proposed by NOC and prescribed in an approved Development Plan

contemplate the delivery of Gas in quantities that do not permit the Plateau

Production Target to be met within three (3) Years of the approval date of the Final

Development Plan, but no later than six (6) Years after the Effective Date, the Parties

shall negotiate in good faith with a view to arranging for alternative or additional offtake arrangements that would permit the Plateau Production Target to be met within

this time period. If no such arrangements are agreed upon within two (2) Years after

the date of approval of the Final Development Plan, then the Plateau Production

Target used for purposes of adjusting the Remuneration Fee pursuant to Article 19.5

shall be reduced to reflect the actual off-take arrangements prescribed in the Final

Development Plan.

(End of Article 11)



ARTICLE 12 – APPROVAL OF DEVELOPMENT PLANS AND WORK PROGRAMS

12.1



No Petroleum Operations shall be carried out unless and until the relevant Work

Program and Budget, Development Plan, or their Revisions, has been duly approved.



12.2



Contractor shall prepare and submit to the JMC, or the BOD, in a timely manner its

proposals concerning the Plans, or their Revisions as well as the annual Work

Programs and Budgets or their Revisions, and any administrative, accounting or

other operating procedures, complete with supporting studies, data and information,

for approval in accordance with the following procedure:

(a)



within fourteen (14) days of receiving Contractor's proposal or revised

proposal, in respect of annual Work Programs and Budgets, and any

administrative, accounting or other operating procedures, the JMC or BOD

shall review and shall either approve or return to Contractor with

recommended changes. Contractor shall, within a further fourteen (14) days

of receiving recommended changes, amend the proposal and re-submit to the

JMC or BOD for approval;



(b)



within twenty (20) days of receiving Contractor's proposal or proposed

Revision in respect of Development Plans the JMC or BOD shall review the

proposal and pass to the NOC for endorsement or return to the Contractor

with recommended changes. Contractor shall amend the proposal and resubmit to the JMC or BOD for approval no later than thirty (30) days

thereafter;



(c)



within thirty (30) days of receiving a Development Plan from the JMC or BOD,

the NOC shall advise Contractor and the JMC or BOD of its endorsement or

rejection. In the event of a rejection the NOC shall provide written advice as to

the reasons for its rejection;



(d)



it is understood that the Parties shall make their best endeavors to expedite

the approval process through close interaction and consultation, and, if

necessary, through the intervention of their senior managements;



(e)



if aspects of an annual Work Program or Budget remain unresolved after

submission to senior management the Parties agree that the Operator will be

authorized to act as though the most recent submission by the Contractor has



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



been approved until such time as final resolution of disputed items has

occurred; and

(f)



time periods in this Article 12.2 shall be subject to appropriate extensions

corresponding to any delay resulting from Force Majeure or as otherwise

agreed between the Parties. In either case, if the total period taken for

approval and endorsement of the Preliminary Development Plan or the Final

Development Plan exceeds one hundred and twenty (120) days, then the

Term together with all rights and obligations hereunder shall be extended to

reflect the additional time taken for approvals.



12.3



After the approval of the annual Work Program and Budget by the JMC or BOD, it

shall be implemented by Operator under the general supervision and control of the

JMC or BOD. Operator may make minor changes to the details of an approved Work

Program and Budget, provided, however, such changes shall not change the

budgeted amount for each major line item by more than ten percent (10%), change

the total approved Budget by more than five percent (5%), or alter the general

objectives of the Work Program. Otherwise, the change shall be considered a

Revision calling for the JMC’s or BOD’s prior approval unless such changes are

warranted under emergency or extraordinary circumstances requiring immediate

action, including but not limited to safeguarding lives or property, protection of the

environment or for health reasons. Such emergency changes shall be reported by

Contractor to the JMC or BOD and NOC within five (5) working days.



12.4



Any modification to an approved Development Plan that alters the general objectives

of the approved Development Plan or change the total estimated cost by more than

ten percent (10%), shall be considered a Revision of the said Plan which shall be

subject to NOC’s approval in accordance with this Article 12.



12.5



NOC shall have the right to review the proposed level of production in respect of any

proposed or approved annual Work Program and may, upon written notification,

require Contractor and/or Operator to increase or decrease the rate of production

from the Contract Area for any of the following reasons:

(a)



to avoid material damage to reservoirs;



(b)



for safety considerations;



(c)



for operational considerations; and



(d)



for Government imposed curtailment.



12.6



In case reduction of Gas production is to be applied by NOC pursuant to Article

12.5(d), NOC shall apply such reduction in a non-discriminatory manner to all of its

production from the Republic of Iraq. Contractor and Operator shall comply with such

reduction upon receipt of notification from NOC to this effect. For as long as such

production curtailment is imposed, the Remuneration Fee Bid adjustment under

Article 19.7 shall cease to apply. As soon as the imposed production curtailment is

over, the Parties shall meet to agree in good faith on a possible revised Field

production schedule with a view to compensating Contractor as soon as practicable

for lost revenue, as a result of the reduction, all in accordance with Best International

Petroleum Industry Practices. Failing a revised production schedule, the Parties may

agree an appropriate extension to the Term.



12.7



NOC may, at any time by written notice, request Contractor to fund and Operator to

execute specific works or build specific facilities not included in approved

Development Plans or associated Work Programs and Budgets. Within ninety (90)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



days of receiving such notice, Contractor and Operator shall amend the relevant

Work Program and Budget or Development Plan accordingly. All costs associated

with the construction and operation of the additional facilities or works paid for by the

Contractor shall be considered Supplementary Costs. If Contractor decides not to

share in the risks and rewards of such works and facilities and not to execute them

pursuant to this Contract, the costs thereof shall be borne by NOC. In such event,

NOC shall have the right to appoint a third party to execute the works taking care not

to hinder or unduly interfere with Petroleum Operations, and the said works shall be

for NOC’s sole risk and reward.

(End of Article 12)

ARTICLE 13 – JOINT MANAGEMENT OF PETROLEUM OPERATIONS

13.1



The Parties shall establish, within thirty (30) days from the Effective Date, the Joint

Management Committee or JMC, for the purpose of general supervision and control

of Petroleum Operations until the Date of Transfer of Operatorship (after which date

the functions of the JMC shall be transferred to the BOD). NOC shall nominate four

(4) members, including the chairman. Contractor shall nominate four (4) members,

including the deputy chairman, the secretary, and a member from the State Partner.

The Parties shall also designate one alternate to each of their members and shall

promptly inform each other in writing of any change of the members or alternates.



13.2



JMC shall have the following duties and authorities related to Petroleum Operations:

(a)



review and recommendation of Development Plans and any Revisions

thereof;



(b)



review and approval of annual Work Programs and Budgets, production

schedules, and any Revisions thereof;



(c)



review and approval of operating procedures pursuant to Article 9;



(d)



review and/or approval of the award of sub-contracts and purchase orders as

applicable pursuant to Article 9.19(c);



(e)



approval of training programs and Iraqization plans for integrating Iraqi

personnel into various aspects of Petroleum Operations, pursuant to Articles

9.21(a) and (b) and 26.2;



(f)



supervision and control of the implementation of approved Development

Plans and Work Programs and the overall policy of Operator;



(g)



review and approval of the manpower strength and organization chart of

Operator with respect to Petroleum Operations;



(h)



review of Quarterly statements, annual accounts and other financial

statements related to Petroleum Operations;



(i)



review of periodical and other reports submitted by Contractor or Operator

and issue of comments and recommendations to ensure proper

implementation of Petroleum Operations in accordance with the provisions of

this Contract; and



(j)



recommendation of the appointment of the independent international auditor

as per Article 20.4.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



13.3



Decisions of the JMC shall be taken by unanimous vote of the members or their

alternates present at the meeting or by proxy. In the event that the JMC is unable to

reach a unanimous decision in respect of any issue for which it is responsible under

this Contract, then the issue shall be promptly referred to the senior management of

the Parties for resolution. The quorum shall be at least three (3) members or

alternates of each Party. Decisions taken by the JMC shall be recorded in official

minutes signed by the members present and communicated by the Operator to the

Parties.



13.4



JMC shall meet whenever necessary or expedient for the implementation of this

Contract and at any time a Party requests a meeting to be held. In any event the

JMC shall meet at least once every Quarter. A meeting of the JMC may be convened

by either Party giving not less than twenty (20) days prior written notice to the other

Party or, in a case requiring urgent action, by giving reasonable shorter notice, with

decisions by way of circulated written resolutions. Operator shall prepare the agenda

and necessary documents prior to such meetings and communicate the same to the

members of the JMC. Either Party may add any matter related to Petroleum

Operations not listed by Operator to any JMC meeting agenda.



13.5



JMC may adopt such procedures as it deems appropriate regarding the conduct of its

functions, meetings, and other related matters. For the purpose of facilitating the

conduct of its functions, the JMC may appoint such appropriate sub-committees as

shall from time to time be required.



13.6



All reasonable costs incurred by Contractor and approved by the JMC for the

carrying out of its duties shall be considered as Petroleum Costs.

(End of Article 13)



ARTICLE 14 – DATA AND SAMPLES

14.1



All original data and samples obtained by Contractor or the Operator shall be the

property of NOC.



14.2



Contractor and Operator shall provide NOC, free of charge, with copies of any and all

data obtained as a result of Petroleum Operations including, but not limited to,

geological, geophysical, geochemical, petrophysical, engineering, well logs, maps,

magnetic tapes, cores, cuttings and production data as well as all interpretative and

derivative data, including reports, analyses, interpretations and evaluation prepared

in respect of Petroleum Operations (hereinafter referred to as "Data"). Contractor and

Operator shall have the right to make use of such Data, free of charge, for the

purpose of Petroleum Operations.



14.3



Contractor and Operator may, for use in Petroleum Operations, retain copies or

samples of material or information constituting the Data and, with the approval of

NOC, original material. Where such material is capable of reproduction or division,

and when originals have first been delivered to NOC, Contractor and Operator may

export samples or other reproduced material for processing or laboratory

examination or analysis, taking into consideration whether such analysis can be

conducted in the Republic of Iraq. Contractor and Operator shall guarantee their

proper handling and keeping, and that such exports shall be returned to the Republic

of Iraq within a maximum period of three (3) months from the date of completion of

any study, analysis or processing thereof, except for the consumable samples and

materials.



14.4



Contractor and Operator shall save and keep in the Republic of Iraq, for a minimum



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



period of one (1) Year, representative portions of each sample of cores and cuttings

taken from drilled wells, to be disposed of or forwarded to NOC in a manner directed

by NOC.

14.5



Contractor shall work with NOC to cause the establishment of entities in the Republic

of Iraq capable of analyzing and processing Data obtained during Petroleum

Operations.

(End of Article 14)



ARTICLE 15 – REPORTS AND RECORDS

15.1



15.2



Contractor and Operator shall report in writing to NOC the progress of Petroleum

Operations according to the following schedule:

(a)



within one (1) month of the last day of March, June, September and

December covering the previous Quarter; and



(b)



within three (3) months of the last day of December covering the previous

Calendar Year.



A report under Article 15.1 shall contain, without limitation, the following in respect of

the period which it covers:

(a)



details of Petroleum Operations and the factual information obtained;



(b)



description of the area in which Contractor and Operator have operated;



(c)



account of the expenditure on Petroleum Operations in accordance with the

Accounting Procedure; and



(d)



maps indicating all bore-holes, wells and other Petroleum Operations.



15.3



Contractor and Operator shall prepare at all times during the Term accurate and

current records of their operations. Such records shall be maintained by Contractor

and Operator in accordance with procedures to be established by the JMC or BOD,

and in accordance with Best International Petroleum Industry Practices.



15.4



Operator’s reports on Petroleum Operations shall comply with the Law.

(End of Article 15)



ARTICLE 16 – ACCESS AND INSPECTION

16.1



NOC's duly authorized inspectors shall, upon written prior notice to the Operator and

Contractor, have access to the Contract Area and any other area where Petroleum

Operations are being carried out, for the purpose of inspection of the same. Such

inspectors may examine the books, registers and records of Operator and may

require Operator to make a reasonable number of surveys, drawings, tests and the

like for the purpose of enforcing the provisions of this Contract. They shall, for this

purpose, be entitled to make reasonable use or inspection of devices, machinery and

instruments used for measurement and other Petroleum Operations. The inspectors

shall make all reasonable efforts to conduct any inspection in a manner that will

result in a minimum of inconvenience and interruption to the Petroleum Operations,

and the inspectors shall always take due account of the advice from the Operator

and the Contractor when conducting the inspections. Such inspectors shall be given

assistance by the agents and employees of Operator to facilitate the objectives of



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



their task and to avoid endangering or hindering the safety or efficiency of Petroleum

Operations. Operator shall offer such inspectors all privileges and facilities afforded

to its own staff in the Field and shall provide them, free of charge, with reasonable

office space and adequately furnished housing and lodging while they are on the

Field whether on a temporary or permanent basis.

16.2



Competent Government authorities shall have access to the Contract Area and to the

operations conducted therein by Operator, in the course of carrying out their duties in

accordance with the Law. Operator shall offer the necessary assistance and services

to such officials free of charge in order to facilitate their objectives.



16.3



Reasonable costs and expenses incurred by Contractor or Operator in implementing

the provisions of this Article shall be considered as Petroleum Costs.

(End of Article 16)



ARTICLE 17 – MEASUREMENT, TRANSFER, AND DELIVERY OF PETROLEUM

17.1



The volume and quality of Gas and NGL, if applicable, shall be measured at a

Production Measurement Point immediately upstream the relevant Transfer Point.

The location of the PMP and TP shall be specified in the relevant approved

Development Plan so as to be within or close to the Contract Area.



17.2



In accordance with Addendum Two, the Operator shall deliver Net Gas Production

and any other Petroleum to Transporter, on behalf of NOC, at the respective Transfer

Point(s). The transportation of Petroleum from the Transfer Point(s) down to the

Delivery Point(s) shall be carried out by the Transporter, under the terms of

Addendum Two and the subsequent Petroleum Transfer Agreement. Transporter

shall act exclusively on behalf of NOC, and Contractor and Operator shall have no

rights or obligations in respect of the transportation of Petroleum from the Transfer

Point(s) to the Delivery Point(s) except as set forth in Article 17.6 and Annex E.



17.3



Where production from the Contract Area is curtailed or suspended, other than for

minor service outages, through failure of Transporter to receive the same at the

Transfer Point through no fault of the Operator or Contractor, the Parties shall meet

and agree appropriate measures to compensate the Contractor.



17.4



Methods and procedures for measurement of volume and quality of Petroleum at the

Transfer Point(s) shall be as per Addendum Two and the subsequent Petroleum

Transfer Agreement.



17.5



Gas and NGL may be commingled with correspondent streams produced from other

fields.



17.6



Prior to delivery at the Transfer Point, Net Gas Production shall satisfy the minimum

quality and condition specifications defined in the relevant approved Development

Plan.



17.7



If agreed in an approved Plan Contractor shall finance and/or build transportation

facilities downstream of the Transfer Point over and above those required by Annex

E. In the event that Contractor finances and/or builds such transportation facilities,

they shall be handed over to the Transporter upon completion and commissioning.



17.8



Unless related to obligations under Annex E, any costs and expenses incurred by

Contractor or Operator pursuant to Article 17.7 shall be Supplementary Costs.

(End of Article 17)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 18 – VALUATION OF PETROLEUM

18.1



It is the intent of both Parties that the pricing of Export Oil for all purposes under this

Contract shall reflect the prevailing export market price FOB Delivery Point.



18.2



The Export Oil Price for each quality of Export Oil that may be lifted by Contractor,

during any month of the Lifting Quarter, shall reflect SOMO's declared Official Selling

Price for the scheduled month of loading FOB Delivery Point for the said quality of

Export Oil for that Quarter.



18.3



In the event that market conditions oblige SOMO to adopt a different pricing

mechanism than the one set forth in Articles 18.1 or 18.2, the Parties shall promptly

convene to discuss in good faith the new pricing mechanism and agree on the same.

In the event that the Contractor demonstrates to NOC that the OSP is not reflective

of export market prices, the Parties shall meet and agree appropriate measures.



18.4



The deemed value of Gas and NGL for the purposes of payment of Service Fees and

Supplementary Fees under Article 19 in any Quarter shall reflect the average of the

price of Low Sulfur Resid Fuel Oil Med FOB 1% for that Quarter, assuming 6,000

SCF of Gas or 1.0 Barrel of NGL is equivalent to one Barrel of Fuel Oil, as published

by Platts Oilgram Price Report.



18.5



Contractor shall cooperate with SOMO in areas such as:

(a)



follow-up of worldwide evolution in export qualities of Gas and NGL;



(b)



market studies and outlet forecasts in various market areas; and



(c)



other information concerning market conditions.



The costs of such cooperation shall be considered Petroleum Costs.

(End of Article 18)

ARTICLE 19 – SERVICE FEES AND SUPPLEMENTARY FEES

19.1



For the Petroleum Operations performed under this Contract, Contractor is entitled to

Supplementary Fees and Service Fees. In accordance with this Article 19,

Supplementary Fees shall be comprised of Supplementary Costs. Service Fees

shall be comprised of Petroleum Costs and a Remuneration Fee.



19.2



Supplementary Costs

Contractor shall start charging Supplementary Costs to the Operating Account as

from the Effective Date, in accordance with this Contract and Accounting Procedure

but the same shall be due and payable according to the following:

(a)



the signature bonus paid under Article 4 shall be amortized and recovered

over twenty (20) equal Quarterly payments beginning with the ninth Quarter

following the Quarter in which the Effective Date occurs;



(b)



de-mining costs incurred pursuant to Article 7.3 shall be recovered over eight

(8) equal Quarterly payments beginning with the first Quarter following the

date on which de-mining costs start being incurred;



(c)



costs or expenses incurred pursuant to Articles 12.7 and 17.8 (excluding

costs incurred pursuant to Annex E) for additional facilities shall accrue and



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



be payable beginning in the first Month of the Calendar Quarter following their

payment date;



19.3



(d)



costs or expenditures incurred pursuant to Article 41.6 for remediation of preexisting environmental conditions shall accrue and be payable beginning in

the first Month of the Calendar Quarter following their payment date; and



(e)



outstanding balances on all Supplementary Costs shall bear interest at

LIBOR plus one percent (1%) from the date when Supplementary Costs are

incurred until the date when Supplementary Fees are received.



Supplementary Fees

The Supplementary Fees due to Contractor shall be paid in Export Oil at the Delivery

Point or, at NOC’s option, in cash, in USD, within sixty (60) days of the submission of

an invoice pursuant to Article 9 of the Accounting Procedure. For payment in Export

Oil, the Export Oil Price shall be in accordance with Article 18. NOC shall notify

Contractor of its election whether to pay Supplementary Fees in cash or in Export Oil

within ten (10) days of receipt of Contractor’s first invoice for payment of

Supplementary Fees. Such election shall remain in effect for the remainder of this

Contract, unless otherwise agreed by the Parties.



19.4



(a)



Supplementary Fees shall be deemed to cover all amounts due to Contractor

for Supplementary Costs.



(b)



Supplementary Fees shall become due and payable as detailed in Article

19.2 and shall be paid to the extent of one hundred percent (100%) of the

deemed revenues of the Net Gas Production remaining after payment of

Service Fees.



(c)



Any due and payable Supplementary Fees that remain unpaid in respect of

any Calendar Quarter shall be carried forward and paid in succeeding

Quarter(s) until fully paid.



(d)



NOC reserves the right at any time by notice to Contractor to decrease the

amortization periods specified in Articles 19.2(a) and 19.2(b).



Petroleum Costs

Contractor shall start charging Petroleum Costs to the Operating Account as from the

Effective Date, in accordance with this Contract and Accounting Procedure, but the

same shall be due and payable only from the date of First Commercial Production.



19.5



Remuneration Fee

Contractor shall start charging the Remuneration Fee to the Operating Account only

from the date of First Commercial Production, in accordance with this Contract and

the Accounting Procedure.

For each Calendar Quarter, commencing with the Calendar Quarter following the

Quarter in which the First Commercial Production occurs, the Remuneration Fee

shall be an amount equal to the product of the Remuneration Fee per Barrel of Fuel

Oil Equivalent applicable to such Quarter, multiplied by the Net Gas Production (also

expressed in terms of Barrels of Fuel Oil Equivalent) applicable to such Quarter and

subject to the performance adjustment in Article 9.5.

The Remuneration Fee per Barrel of Fuel Oil Equivalent applicable for all Calendar

Quarters during any given Calendar Year shall be determined on the basis of the R-



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Factor calculated at the end of the preceding Calendar Year for the Field as follows:

R-Factor

Less than 1.0

1.0 to less than 1.25

1.25 to less than 1.5

1.5 to less than 2.0

2.0 and above

19.6



Remuneration Fee Per Barrel of Fuel Oil Equivalent

(USD)

Remuneration Fee Bid (RFB)

80%*RFB

60%*RFB

50%*RFB

30%*RFB



The R-Factor achieved by Contractor as at the end of any Calendar Year shall be

calculated by dividing the aggregate value of Cash Receipts from the Effective Date

up to and including that Calendar Year by the aggregate of Expenditure over that

same time frame.

For the purposes of calculating the R-Factor:

Aggregate "Cash Receipts" of Contractor from Petroleum Operations as of the end of

any Calendar Year is the aggregate value from the Effective Date up to and including

that Calendar Year of:

(a)



Service Fees paid to Contractor as provided in Article 19.8; plus



(b)



any Contractor’s incidental income (of the type specified in the Accounting

Procedure) arising from Petroleum Operations;



Aggregate "Expenditure" made by Contractor for Petroleum Operations as of the end

of any Calendar Year is the aggregate value from the Effective Date up to and

including that Calendar Year of:

(a)



Petroleum Costs; plus



(b)



Training, Technology and Scholarship Fund as per Article 26. For the

avoidance of doubt, this expense is included as Expenditure for purposes of

determining the R-Factor, but shall not be Petroleum Costs.



19.7



During the Plateau Production Period the Remuneration Fee payable in respect of

any Quarter shall be adjusted by multiplying by the Performance Factor. However,

any adjustment of the Remuneration Fee under this ARTICLE 19 – shall cease for so

long as the following cases shall apply: (i) Government imposed production

curtailment under Article 12.6; or (ii) where normal production is curtailed or

suspended through failure of Transporter to receive the same at the Transfer Point at

no fault of Operator or Contractor.



19.8



Service Fees

The Service Fees due to Contractor shall be paid without interest, preferably in

Export Oil at the Delivery Point or at Contractor’s election in cash, in USD, within

sixty (60) days of the submission of an invoice pursuant to Article 9 of the Accounting

Procedures. For payment in Export Oil, the Export Oil Price shall be in accordance

with Article 18. Contractor shall notify NOC of its election whether to receive Service

Fees in cash or in Export Oil no later than the date of First Commercial Production.

Such election shall remain in effect for the remainder of this Contract, unless

otherwise agreed by the Parties.

(a)



The Service Fees shall be deemed to cover all costs, expenses, liabilities and

remuneration to Contractor under this Contract. NOC shall not be obliged to

pay any other compensation whatsoever to Contractor for the fulfillment of its



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



obligations under this Contract.



19.9



(b)



Service Fees shall become due and payable starting with the first Calendar

Quarter in which the First Commercial Production occurs and shall be paid to

the extent of fifty percent (50%) of the deemed revenues of the Net Gas

Production in accordance with the provisions of this Contract. Payment of due

and payable Petroleum Costs shall have priority over the payment of due and

payable Remuneration Fees.



(c)



Any due and payable Service Fees that remain unpaid in respect of any

Calendar Quarter shall be carried forward and paid in succeeding Quarter(s)

until fully paid.



Subject to Article 8, any due and payable Service Fees and Supplementary Fees that

remain outstanding at the expiry or termination of this Contract shall become

immediately due and payable within thirty (30) days thereof, or under such other

terms as may be agreed by the Parties.



19.10 In case the Supplementary Fees or Service Fees are paid in Export Oil, ROC shall

arrange with SOMO to deliver to Contractor at the Delivery Point an amount of Export

Oil, at the relevant Export Oil Price, equivalent to the amount of Supplementary Fees

or Service Fees owed and payable hereunder. Contractor’s Quarterly lifting of Export

Oil shall be estimated in advance on the basis of unpaid Supplementary Fees or

Service Fees carried forward, production schedule and estimated Export Oil Price.

Contractor’s final lifting shall be adjusted on the basis of actual amounts of

Supplementary Fees or Service Fees owed as computed under this Article 19, and

on the applicable Export Oil Price in accordance with the provisions of Article 18 and

Addendum Four.

(End of Article 19)

ARTICLE 20 –BOOKS OF ACCOUNT, ACCOUNTING AND AUDIT

20.1



Contractor and Operator shall maintain at their business offices in the Republic of

Iraq books of account in accordance with the Accounting Procedure and accepted

accounting practices generally used in the international petroleum industry, and such

other books, records and original supporting documents as necessary to show the

work performed and expenditures and costs incurred including the quantity and value

of all Petroleum produced, saved, and delivered as well as the quantity and value of

Export Oil received by Contractor at the Delivery Point.



20.2



Contractor and Operator shall keep their books of account and accounting records in

Dollars and in the English language. Contractor and Operator shall also prepare and

keep an Arabic summary of the main items of these books of account and accounting

records.



20.3



Contractor and Operator shall furnish to NOC or its designee monthly reports

showing the quantity of Petroleum produced and saved from the Contract Area. Such

reports shall be prepared in accordance with practices generally used in the

international petroleum industry and in a form agreed upon with NOC. The reports

shall be signed by the authorized representatives of Contractor and Operator or their

deputies and delivered to NOC or its designee within thirty (30) days after the end of

the Month covered by such report.



20.4



The Parties shall jointly appoint an independent auditor of international qualification

and standing to audit all the books and accounts of Contractor and Operator on an



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



annual basis and report thereon. The costs of such audit, together with the audit fees

of the Iraqi Supreme Auditing Board for statutory audit of the Contractor’s offices in

the Republic of Iraq, shall be considered as Petroleum Costs. For cost recovery

purposes, the auditors shall determine whether:

(a)



the record of costs is correct;



(b)



the costs are in accordance with this Contract;



(c)



the costs are properly classified in accordance with the expenditure

classification;



(d)



documentation exists to justify such costs and expenditures; and



(e)



evidence exists of fraudulent records and accounts in respect of the costs

incurred.



20.5



Contractor and Operator shall, within forty five (45) days after the end of each

Quarter, submit to NOC a statement of Petroleum Costs, Remuneration Fees and

Supplementary Costs showing costs incurred by Contractor during such Quarter as

per Annex C.



20.6



Contractor shall submit to NOC a set of accounts audited by the independent auditor

for each Calendar Year within three (3) months from the last day of said Calendar

Year to show the results of Petroleum Operations.



20.7



Contractor’s and Operator’s books, records and necessary supporting documents

shall be made available for auditing by NOC at any time during regular working hours

for twelve (12) months from the end of each Quarter to which such documents relate.

If within such twelve (12) months, NOC has not advised Contractor of its objections

thereto, the said books, records and supporting documents shall be deemed

approved.



20.8



If the NOC has an objection to any costs, expenses or fees as reported and invoiced

by the Contractor, the NOC will notify the Contractor of its objection in writing but

shall pay both the disputed costs and undisputed amounts pending resolution of the

matter. Within three (3) months period from the date of Contractor’s receipt of NOC’s

objection, Contractor and NOC shall mutually agree to either seek in good faith an

acceptable solution or nominate one (1) or more Experts to settle the matter. If the

matter is referred to an Expert, the Expert shall, within the three (3) month period

following their appointment, provide their solution to the dispute that is in line with the

provisions of this Contract and Annex C. Failing such settlement, either Party may

refer the matter to arbitration pursuant to Article 37.



20.9



The books of account and other books and records referred to above shall be made

available by Contractor and Operator at all reasonable times for auditing by duly

authorized representatives of the Government, in accordance with the Law.

(End of Article 20)



ARTICLE 21 – EXCHANGE AND CURRENCY CONTROL

21.1



Contractor and Operator shall have the right of availability, free possession, use of,

and internal and external disposal of foreign currency.



21.2



Contractor shall provide funds necessary for Petroleum Operations in the Republic of

Iraq in freely convertible foreign currencies supplied from abroad.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



21.3



Contractor and Operator are authorized to open and operate accounts in foreign

banks outside of the Republic of Iraq and shall have the right to make payments out

of the said accounts directly in foreign currencies for goods and services obtained for

Petroleum Operations in The Republic of Iraq and to charge such payments in

accordance with the provisions of this Contract without having first to transfer the

funds for such payments to the Republic of Iraq.



21.4



Contractor and Operator and non-Iraqi Sub-Contractors shall have the right to open

and maintain bank accounts in foreign and/or local currencies in the Republic of Iraq

in accordance with Central Bank of Iraq regulations and retain or dispose of any

funds therein for its Petroleum Operations in accordance with Central Bank of Iraq

regulations.

(End of Article 21)



ARTICLE 22 –TITLE TO ASSETS

22.1



All assets acquired and/or provided by Contractor and Operator in connection with or

in relation to Petroleum Operations, the costs of which are subject to recovery in

accordance with the provisions of this Contract, shall become the property of NOC

upon their landing at the Republic of Iraq.



22.2



Notwithstanding the above, Contractor and Operator shall be entitled to the full and

free use of such assets for the purpose and duration of this Contract. During the

Term of this Contract, NOC and Contractor shall not assign, sell or otherwise dispose

of such fixed and/or movable assets except by mutual agreement.



22.3



The provisions of Article 22.1 shall not apply to equipment leased by Contractor and

Operator or belonging to Sub-Contractors who perform services or carry out works in

connection with Petroleum Operations. Contractor and Operator and non-Iraqi SubContractors may, with the prior approval of NOC, import such equipment on a

temporary basis. Unless otherwise agreed by NOC, such equipment shall be reexported from the Republic of Iraq subject to the provisions of Article 25, as and

when it is no longer required for Petroleum Operations.

(End of Article 22)



ARTICLE 23 –TAXES

23.1



Each Contractor entity shall keep books of account and be individually liable for and

shall pay taxes in accordance with the Law.



23.2



In no event shall NOC be liable under this Contract for any taxes payable by

Companies outside the Republic of Iraq.

(End of Article 23)



ARTICLE 24 – PARTNERSHIP, INDEMNITY AND INSURANCE

24.1



It is expressly agreed that it is not the purpose or intention of this Contract to create,

nor shall it be construed as creating, any mining partnership, joint venture,

commercial partnership or other partnership.



24.2



Contractor shall indemnify and hold NOC harmless against all and any claims,

actions, demands and proceedings made by third parties arising out of any loss or



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



damage resulting from an act or omission of Contractor and/or Operator or their SubContractors in their conduct of Petroleum Operations. All costs incurred by

Contractor to indemnify and hold NOC harmless as aforesaid shall be Petroleum

Costs except in the case of Gross Negligence or Willful Misconduct on the part of the

Contractor and/or Operator or their Sub-Contractors.

24.3



Contractor shall be liable for any loss of or damage to any installations belonging to

NOC or any third party arising from Gross Negligence or Willful Misconduct of

Contractor and/or Operator or their Sub-Contractors.



24.4



Notwithstanding the foregoing, under no circumstances shall Contractor or Operator

be liable for consequential damages such as loss of profit or loss of production.



24.5



Contractor and Operator shall establish an insurance plan, to be approved by the

JMC or BOD, for its operations hereunder and obtain the insurance policies in

accordance therewith. Such insurance shall cover the types of exposure that are

normally covered in the international petroleum industry, including but not limited to

damage to equipment, installations and third party liabilities. Contractor and Operator

shall ensure that its Sub-Contractors adequately insure their risks under their

relevant sub-contracts.



24.6



Such insurance plan will require Contractor and Operator obtain and maintain

insurances with an Iraqi or foreign insurance company operating in the Republic of

Iraq to cover the risks in connection with Petroleum Operations and any other

activities related thereto and as may be required by the Law during the Term,

including third party liability and environmental damage and injury where such

coverage is available in the Republic of Iraq. If such coverage is unavailable in the

Republic of Iraq, insurance shall be obtained from a foreign insurance company. The

insurance company shall arrange, in co-operation with Contractor and Operator to

the extent needed, re-insurance placement for coverages on the international market

for the part of exposure in excess of the insurance company’s net retention.



24.7



The cost of insurance obtained and maintained by Contractor and Operator and any

amounts paid for deductibles, losses, or claims in excess of such insurance and not

attributable to the Gross Negligence or Willful Misconduct of Contractor and Operator

or Sub-Contractors under this Contract shall be Petroleum Costs.



24.8



Contractor and Operator shall notify NOC of the issue and terms of all insurance

policies obtained by it under this Contract.

(End of Article 24)



ARTICLE 25 – IMPORTS AND EXPORTS

25.1



Contractor and Operator and respective Sub-Contractors engaged in Petroleum

Operations shall be permitted to import machinery, equipment, vehicles, materials,

supplies, consumables and movable property to be used solely for the purpose of

carrying out Petroleum Operations and supporting activities. Such imports shall be

exempt from customs duties provided that applicable administrative formalities are

complied with.



25.2



Expatriate employees of Contractor and Operator and Sub-Contractors shall be

permitted to import, and shall be exempted from customs duties with respect to the

reasonable importation of, household goods and personal effects, provided that such

properties are imported for the sole use of the employee and his family and provided

further that such imported property shall be re-exported by employee without any



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



export duty or impost upon termination of his employment, or be disposed of in the

Republic of Iraq in accordance with the Law.

25.3



Items imported by Contractor and Operator or Sub-Contractors on a temporary basis

and no longer required for Petroleum Operations or supporting activities shall, unless

otherwise agreed by NOC, be re-exported without any export duty or impost in

accordance with the Law.



25.4



The sale in the Republic of Iraq of any imported items under this Contract shall be

subject to NOC’s prior consent and to the relevant Law.



25.5



Customs duties, as used herein, shall include all duties, taxes and other financial

imposts which may be due as a result of the importation of the above-mentioned

items but, shall not include charges, dues or fees of general application to be paid to

Governmental entities for services rendered.



25.6



Contractor shall be exempted from any export duty or impost with respect to the

Export Oil that Contractor may lift under this Contract, except for port dues of general

application to all buyers for services rendered by the port authorities in accordance

with the Law. Such port dues shall not be considered Petroleum Costs.

(End of Article 25)



ARTICLE 26 – EMPLOYMENT, TRAINING, AND TECHNOLOGY TRANSFER

26.1



Without prejudice to the right of Operator to select and employ such number of

personnel as, in the opinion of the Operator, are required for carrying out Petroleum

Operations in a safe, cost effective and efficient manner, Operator shall, to the

maximum extent possible, employ, and require Sub-Contractors to employ, Iraqi

nationals having the requisite qualifications and experience.



26.2



Through a Training, Technology and Scholarship Fund, Contractor and Operator

shall offer and facilitate for an agreed number of Iraqi nationals, as designated by

NOC, the opportunity, both inside and outside of the Republic of Iraq, for on-the-job

training and practical experience in Petroleum Operations, and academic education.

The Fund shall also be used for supporting oil and gas related technology and

research including the establishment or upgrading of research institutes inside the

Republic of Iraq.



26.3



As a minimum, Contractor shall allocate during the Term an annual amount of five

million Dollars (US$ 5,000,000) to the Training, Technology and Scholarship Fund.

The Fund payment shall not be recoverable as Petroleum Costs.



26.4



Not later than six (6) months after the Effective Date, Contractor and Operator shall,

in consultation with NOC, establish and implement training programs for staff

positions in each phase and level of Petroleum Operations including skilled,

technical, executive and management positions, with a view to ensuring employment

of Iraqi nationals and gradual and progressive reduction or replacement of

expatriates.



26.5



The Companies shall separately negotiate, in good faith, technical assistance

agreements with NOC whereby every Company may make available commercially

proven technology and information of a proprietary nature for use in the Republic of

Iraq by the NOC and its Affiliates.

(End of Article 26)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 27 – PARTICIPATION

27.1



The State Partner shall have twenty-five percent (25%) of Contractor's total

Participating Interest and the Companies shall have the remaining Participating

Interest of seventy- five percent (75%).



27.2



Companies shall pay for all of the State Partner’s share of Petroleum Costs and

Supplementary Costs during the Term and any extension thereto. The Companies

shall have entitlement to all Petroleum Costs paid as Service Fees and

Supplementary Costs paid as Supplementary Fees, while the State Partner will be

entitled to receive 25% of any Remuneration Fee paid.



27.3



Participation shall further be subject to the provisions of Addendum One.

(End of Article 27)



ARTICLE 28 – ASSIGNMENT

28.1



Neither Party may assign its rights or obligations under this Contract, in whole or in

part, without the prior written consent of the other Party, except that such rights and

obligations may be assigned without such consent to the successor of such Party or

to a firm or corporation acquiring all or substantially all of the business and assets of

such Party. The direct or indirect transfer of shares or other ownership interests in

any Company (except for the transfer of shares in a listed parent company) shall

constitute an assignment of rights and obligations under this Contract and shall be

subject to this Article 28.1.



28.2



By providing NOC one (1) month prior notice of its intent, any Company shall have

the right to assign any of its Participating Interest, shares, rights, privileges, duties or

obligations under this Contract without the prior written consent of NOC, except to a

recognized wholly-owned and controlled Affiliate. Such assignment shall not release

said Company from its obligations under this Contract and it shall remain jointly

responsible together with the assignee Affiliate for the proper and timely execution of

this Contract.



28.3



In the event that any Company, wishes to assign, in whole or in part, any of its

Participating Interest, shares, rights, privileges, duties or obligations under this

Contract to a third party or an Affiliate that is not wholly-owned and controlled, said

entity shall submit to NOC a request to this effect giving detailed evidence of the

technical and financial competence of the recommended assignee. NOC shall

consider the said request and notify the Company of its approval or otherwise within

three (3) months of receipt thereof. Before such assignment becomes effective, the

foreign assignee shall first provide NOC with a guarantee acceptable to NOC in the

form set out in Annex F.



28.4



If any Company wishes to assign part of its Participating Interest in this Contract to a

third party pursuant to Article 28.3, NOC shall have the option to take such part and

assign it to a nominated Iraqi entity on the same terms and conditions offered to the

third party.



28.5



Notwithstanding the foregoing, for the purpose of financing Petroleum Operations,

any Company may pledge or otherwise encumber, totally or partially, its rights under

this Contract to a first class international bank and/or financing institution acceptable

to NOC (such acceptance shall not be unreasonably withheld), provided that such

pledge or encumbrance shall not in any way affect the rights or interests of NOC.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



28.6



Notwithstanding the above, any Company shall not assign its obligations or duties as

Operator during the period from the Effective Date to the time of establishment of the

Joint Operating Company except to a wholly-owned and controlled Affiliate or to an

Iraqi entity subject to the approval of NOC.



28.7



Without prejudice to the provisions of the Heads of Joint Operating Agreement

(Addendum One), in the event that any Company (or its parent company that

provides a guarantee) becomes bankrupt, or makes an arrangement with or

assignment in favor of its creditors or makes a composition with creditors, or if it

assigns to a third party any of its interests/shares in this Contract contrary to the

provisions herein, or goes into liquidation other than for reconstruction or

amalgamation with an Affiliate, NOC shall have the right to terminate the participation

of such Company in this Contract by thirty (30) days notice to Contractor, unless

during such period the Company has cured such condition. The rights and obligations

of Company shall be assigned to the remaining Companies proportionately to their

respective Participating Interests or as they may otherwise mutually agree.



28.8



The State Partner may not assign its Participating Interest to any entity that is not

entirely owned and controlled by the Government without the consent of the

Companies, such consent not to be unreasonably withheld.

(End of Article 28)



ARTICLE 29 – LAWS AND REGULATIONS

29.1



Contractor and Operator shall be bound and shall comply in all respects with the

provisions of the Laws. Contractor shall indemnify and hold NOC harmless against all

penalties, fines and other liabilities of every kind for breach of any Law by Contractor

or Operator.



29.2



Notwithstanding the provisions of Article 29.1, Contractor and Operator shall, in

accordance with the Law, be exempted from customs and stamp duties on the

execution of this Contract, and from restrictions concerning work licenses and

employment of expatriates, subject to the provisions of Article 9.2. However,

Contractor shall submit all data and information required by the relevant Iraqi

authorities in this respect.



29.3



Contractor and Operator shall in all their sub-contracts include a provision whereby

Sub-Contractors shall undertake to abide by and comply with the Law.



29.4



Subject to Article 29.5, if, after the Effective Date, the financial interests of Contractor

are adversely and substantially affected by a change to the Law that was in force in

the Republic of Iraq on the Effective Date, or by revocation, modification, or non

renewal of any approvals, consents or exemptions granted to Contractor pursuant to

this Contract (other than as a result of Gross Negligence or Willful Misconduct of

Contractor or Operator), the Parties shall, within ninety (90) days, agree on

necessary adjustments to the relevant provisions of this Contract in order to maintain

Contractor's financial interests under this Contract reasonably unchanged.



29.5



For the purposes of Article 29.4, no adjustment in respect of changes to the Iraqi

income tax law shall be made unless the income tax payable in the Republic of Iraq

exceeds that due based on a thirty five percent (35%) rate with allowance for usual

and standard significant deductions.



29.6



Should the Parties be unable to agree within ninety (90) days on any amendments to

be made in respect of Articles 29.4 and 29.5 or such other period as may be agreed



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



by the Parties, the dispute may be resolved in accordance with Article 37.

(End of Article 29)

ARTICLE 30 – LOCAL GOODS AND SERVICES

30.1



Works and services performed in the Republic of Iraq through sub-contracts shall be

carried out on a competitive basis. Preference shall always be given to Iraqi entities

and firms or foreign firms in association therewith, provided that their relevant

capabilities and prices are competitive with those available in the international

market.



30.2



Preference shall be given to locally manufactured and/or available goods, materials,

equipment, consumables and the like as long as their technical specifications,

availability, prices, and time of delivery are comparable to those available in the

international market



30.3



Contractor and Operator shall ensure that their Sub-Contractors, agents, assignees

and employees shall strictly adhere to the provisions of this Article 30.

(End of Article 30)



ARTICLE 31 – FORCE MAJEURE

31.1



The non-performance or delay in performance by either Party of its obligations or

duties under this Contract shall be excused if and to the extent that such nonperformance or delay is caused by Force Majeure.



31.2



The Party affected by Force Majeure shall notify the other Party thereof in writing

within fourteen (14) days, stating the cause and the extent of effect of such Force

Majeure and shall keep the other Party informed of significant developments. The

affected Party shall use all reasonable diligence to remove or overcome the Force

Majeure situation as quickly as possible in a cost-effective manner.



31.3



Force Majeure shall mean any cause or event, unforeseen or beyond the reasonable

control of the Party claiming to be affected by such cause or event, and shall include,

without limitation, Acts of God, war (whether declared or undeclared), force of nature,

insurrection, riot, fire, legislation/order of the Government and other acts or

circumstances beyond the control of either Party affected by it, provided that such

acts or circumstances are not attributable to the Party invoking Force Majeure or its

Affiliates. Inability to pay monies due shall not constitute a condition of Force Majeure

for either Party.



31.4



In the event that Petroleum Operations are delayed, curtailed or prevented due to

Force Majeure for a period exceeding ninety (90) consecutive days, then the Term

together with all rights and obligations hereunder shall be extended accordingly,

subject to the provisions of Article 8.



31.5



It is agreed by the Parties that the security conditions prevailing in the Contract Area

on Contract signing date shall not constitute a condition of Force Majeure for either

Party. The Parties also agree that the political and security conditions generally

prevailing in the Republic of Iraq in general on the Contract signing date shall not

constitute a condition of Force Majeure for either Party unless these conditions

prevent the implementation of Petroleum Operations.

(End of Article 31)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 32 – ENTIRE AGREEMENT AND AMENDMENTS

32.1



This Contract constitutes the entire agreement between NOC and Contractor relating

to the Field. Hence it supersedes any previous representations, whether explicit or

implicit, and any prior agreement of any kind or nature, whether oral or written, in this

respect.



32.2



This Contract shall not be amended or supplemented except by an instrument in

writing signed by duly authorized representatives of both Parties designated for those

purposes hereto.



32.3



If any provision of this Contract shall be found by any court, tribunal or administrative

body of competent jurisdiction to be invalid or unenforceable, such invalidity or

unenforceability shall not affect the other provisions of this Contract and all provisions

not affected by such invalidity or unenforceability shall remain in full force and effect.

The Parties shall attempt to substitute, for any invalid or unenforceable provision, a

valid and enforceable provision that achieves to the greatest possible extent, the

principal objectives of the invalid or unenforceable provision



32.4



The provisions of this Contract shall inure to the benefit of and be binding upon the

successors and permitted assignees of the Parties.

(End of Article 32)



ARTICLE 33 – CONFIDENTIALITY AND TECHNOLOGY OWNERSHIP

33.1



All information and data obtained in connection with or in relation to this Contract

shall be kept confidential by both Parties and their Affiliates and shall not be

disclosed or communicated to any third party without the other Party’s prior written

consent, except to (i) Affiliates; (ii) any professional consultant retained by a Party or

(iii) where necessary for the approval, implementation and/or financing of Petroleum

Operations; provided that in all cases the party to whom the information or data is

disclosed agrees to the same confidentiality obligation as contained herein.



33.2



The confidentiality undertaking in Article 33.1 shall not apply:

(a)



upon the confidential information becoming public knowledge other than by

default on the part of a Party;



(b)



upon the confidential information becoming available to a Party from a third

party (unless the third party acts in violation of a confidentiality obligation

which the Party is aware);



(c)



if the confidential information is independently developed by a Party or its

Affiliates; or



(d)



to the extent that the confidential information is required by law, judicial

proceedings or applicable stock exchange regulations, to be disclosed.



33.3



The foregoing provisions of Articles 33.1 and 33.2 shall continue in force for three (3)

years following termination or expiry of this Contract.



33.4



To the fullest extent permitted by applicable law or agreements, the Contractor’s

entities agree to make available on reasonable terms their most appropriate technical

expertise and technology (and that of their Affiliates) for use in the conduct of

Petroleum Operations, including such technology as can best improve the economic

yield or performance of the reservoirs operated by the Operator under this Contract.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Any such technology shall remain the property of the relevant Contractor entities (or

their Affiliates), subject to any licensing or other appropriate arrangements entered

into in connection with Petroleum Operations. The Operator shall be entitled to use

such technology only for Petroleum Operations, subject to the terms of such licensing

or other arrangements.

33.5



Any technology specifically developed by the Contractor or the Operator in the

course of their activities under this Contract shall be owned by both Parties, and,

except in the case of disclosure of such to a third party, may be used by any of them

or their Affiliates in their own operations without the consent of the other and without

making any payment to the other.

(End of Article 33)



ARTICLE 34 – HEADINGS OF ARTICLES

Headings of Articles herein are inserted for convenience only and shall not affect the

construction and/or interpretation thereof.

(End of Article 34)

ARTICLE 35 – LANGUAGE

35.1



This Contract is executed in the Arabic and English languages, both having equal

force. However, if there shall be any conflict between the two versions, the English

version shall prevail to the extent of the conflict.



35.2



Communication between the Parties may be in English. However, Contractor and

Operator shall use Arabic or both Arabic and English in all their correspondence and

dealings with Government entities.



35.3



Contractor and Operator shall have no obligation to use any language other than

English in their contractual relationships with Sub-Contractors and vendors in

connection with Petroleum Operations.

(End of Article 35)



ARTICLE 36 –CONTRACTOR'S OFFICE IN THE REPUBLIC OF IRAQ

36.1



Each Company shall establish a presence in the Republic of Iraq as required by the

Law.



36.2



Contractor’s Operator shall, within ninety (90) days of the Effective Date, establish an

office in Baghdad, Iraq and shall maintain such office for the Term. NOC shall assist

Contractor’s Operator in establishing and maintaining the office.



36.3



Contractor’s Operator shall notify NOC of the address of its office in Baghdad and of

the name of its authorized representative in Iraq who shall be assigned on full time

resident status. The said representative shall be entrusted with sufficient powers and

authorities to represent and bind Contractor in all dealings with the Government, the

NOC and third parties in the Republic of Iraq, to receive legal notices served on

Contractor, and to comply with lawful directions and orders given by the competent

Government authorities and NOC in connection with or in relation to this Contract.



36.4



Contractor’s Operator shall notify NOC of any change in the address of its office or



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



the appointment of its representative at least ten (10) days prior to the effective date

of such change.

(End of Article 36)

ARTICLE 37 – GOVERNING LAW, CONCILIATION AND ARBITRATION

37.1



This Contract and the rights and obligations of the Parties shall be governed,

interpreted and construed in accordance with the Law.



37.2



The Parties shall endeavor to settle amicably any dispute ("the Dispute") arising out

of or in connection with or in relation to this Contract or any provision or Agreement

related thereto. Where no such settlement is reached within thirty (30) days of the

date when one Party notifies the other Party of the Dispute, then the matter may, as

appropriate, be referred for resolution by the senior management of the Parties to the

Dispute. Where no such settlement is reached within thirty (30) days of such referral

to management, any party to the Dispute may refer the matter, as appropriate, to an

independent expert or, by giving sixty (60) days notice to the other Parties, refer the

matter to arbitration as stipulated hereunder. It is understood that the obligations

under this Contract constitute commercial rather than sovereign obligations and

therefore no Party shall have the right to claim immunity from legal proceedings or

judgment enforcement in this respect.



Expert

37.3



If any Dispute arises between the Parties with respect to relevant technical matters,

such Dispute may, at the election of any such Party, be referred to an independent

expert "the Expert" for evaluation. Such Expert shall be agreed upon by the Parties to

the Dispute and shall be willing to undertake such evaluation, and shall be

independent, shall not be originated from, or have been at any time a citizen of, the

country in which any of the Parties to the Dispute is organized, and shall have no

interest or relation with any such Party or with any of the entities constituting the

Parties and shall be qualified by education, experience and training to evaluate the

matter in Dispute. The Expert shall render its decision within one (1) month following

the Expert's formal acceptance of its appointment, or within such further time as the

Parties may agree in writing.

The Expert shall act as an expert and not as an arbitrator. The related costs and

expenditure for referring issues for Expert evaluation shall be shared equally by the

Parties in Dispute.



Arbitration

37.4



37.5



All Disputes arising out of or in connection with this Contract, other than those

Disputes that have been finally settled by reference to either senior management or

Expert, shall be finally settled under the Rules of Arbitration of the International

Chamber of Commerce by three arbitrators appointed in accordance with the said

Rules.



The seat of the arbitration shall be Paris, France, unless agreed otherwise by the

Parties to the Dispute.



37.6



The language of arbitration shall be the English language. The award of arbitration

shall be in English and shall be final and binding on the Parties to the Dispute.

Judgment on the award rendered may be entered in any court having jurisdiction in

recognition and enforcement thereof.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



37.7



Unless otherwise agreed by the Parties, the operations and the activities of the

Parties with respect to the performance of this Contract shall not be stopped or

delayed pending the award of arbitration.



37.8



Any arbitration under this Contract must be initiated within two (2) years of the date

on which one Party notifies the other Party of the Dispute, and in any event within

three (3) years of the date of the expiry or termination of this Contract.

(End of Article 37)



ARTICLE 38 – NOTICES

38.1



All notices, statements and other communication to be given, submitted or made by

any Party to the other Party shall be deemed sufficient given when sent in writing and

shall be addressed to the parties at their addresses set out below or such other

address as may be notified in writing by the Parties in accordance herewith.

NOC



Contractor’s Operator



____________________________________ _____________________________________



38.2



Notices to either Party shall be deemed validly served when delivered in person, at

the office of that Party in the Republic of Iraq, during regular office hours and during

working days and if received outside business hours, on the next following working

day, or when received, if posted by registered mail, to the address of the office of the

said Party, or when dispatched and acknowledged, if sent by telex or facsimile, or by

any other mode mutually agreed between the Parties.

(End of Article 38)



ARTICLE 39 – SIGNATURE, RATIFICATION AND EFFECTIVE DATE

The signed Contract shall not be valid unless it is ratified by the Council of Ministers of the

Republic of Iraq. NOC shall promptly notify Contractor in writing of the enforceability and of

the Effective Date of this Contract.

(End of Article 39)

ARTICLE 40 – WAIVER

40.1



Failure or delay on the part of either Party to exercise any right, power or privilege

under this Contract shall not operate as a waiver thereof.



40.2



No waiver by either Party of any one or more obligations or defaults by the other

Party in the performance of this Contract shall operate or be construed as a waiver of

any other obligations or defaults whether of a like or of a different character.

(End of Article 40)



ARTICLE 41 – PROTECTION OF THE ENVIRONMENT

41.1



In the performance of this Contract, Contractor and Operator shall conduct Petroleum



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Operations with due regard to the protection of the environment and the conservation

of natural resources, and shall in particular:

(a)



(b)



adopt Best International Petroleum Industry Practices in conducting and

monitoring Petroleum Operations and take necessary and adequate steps to:

(i)



make all efforts to prevent environmental damage and, should some

adverse impact on the environment occur, to minimize such damage

and the consequential effects thereof on property and people;



(ii)



prevent harm or degradation of livelihood or quality of life of

surrounding communities and, should some adverse impact occur,

minimize such impact and ensure proper compensation for injury to

persons or damage to property caused by the effect of Petroleum

Operations; and



comply with the requirements of the Law and reasonable requirements of

NOC.



41.2



If Contractor and Operator fail to comply with the provisions of Article 41.1(a)(i) or

contravenes any Law, and such failure or contravention results in any environmental

damage, Contractor and Operator shall forthwith take all necessary and reasonable

measures to remedy the failure and the effects thereof.



41.3



If NOC has good reason to believe that any works or installations erected by

Contractor and Operator or any operations conducted by Contractor and Operator

are not in accordance with the Law and are endangering or may endanger persons

or any property of any person, or are causing or may cause pollution, or are harming

or may harm fauna or flora or the environment to a degree which NOC deems

unacceptable, NOC may give notice to Contractor and Operator to promptly consider

and develop for JMC or BOD approval a remedial action plan and measures to

mitigate such damage within a reasonable period as may be determined by NOC and

to repair any such damage. If NOC deems it necessary, it may also require

Contractor and Operator to suspend Petroleum Operations in whole or in part until

Contractor and Operator have taken such remedial measures or have repaired any

damage caused.



41.4



The measures and methods to be used by Operator for the purpose of complying

with the terms of Article 41.1(a)(i) shall be determined in timely consultation with

NOC and Contractor upon the commencement of Petroleum Operations or whenever

there is a significant change in the scope or method of conducting Petroleum

Operations and shall take into account the international standards applicable in

similar circumstances and the relevant environmental impact study carried out in

accordance with Article 41.5 below. Operator shall notify NOC and Contractor, in

writing, of the measures and methods finally determined by Operator and shall cause

such measures and methods to be reviewed from time to time in the light of

prevailing circumstances.



41.5



Contractor shall cause a person or persons with special knowledge of environmental

matters, to carry out two environmental impact studies in order:

(a)



to determine at the time of the studies the prevailing conditions relating to the

environment, human beings, local communities, and the flora and fauna in

the Contract Area and in the adjoining or neighboring areas; and



(b)



to establish the likely effect on the environment, human beings, local

communities, and the flora and fauna in the Contract Area and in adjoining



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



areas as a result of Petroleum Operations, and to submit, for consideration

by the Parties, methods and measures contemplated in Article 41.4 for

minimizing environmental damage and carrying out site restoration activities.

41.6



The first of these environmental impact studies shall act as the baseline study for the

purposes of Article 41.14 and shall be concluded promptly after the Effective Date

but in any event before commencement of any fieldwork.



41.7



The second environmental impact study shall be submitted by Contractor and

Operator as part of the Final Development Plan.



41.8



The studies mentioned in Article 41.5 above shall contain proposed environmental

guidelines to be followed in order to minimize environmental damage and shall

include, but not be limited to, the following, to the extent appropriate to the respective

study taking into account the phase of operations to which the study relates:



41.9



(a)



proposed access cutting;



(b)



clearing and timber salvage;



(c)



wildlife and habitat protection;



(d)



fuel storage and handling;



(e)



use of explosives;



(f)



camps and staging;



(g)



liquid and solid waste disposal;



(h)



cultural and archaeological sites;



(i)



selection of drilling sites;



(j)



terrain stabilization;



(k)



protection of freshwater horizons;



(l)



blow-out prevention plan;



(m)



flaring during completion and testing of Gas Wells;



(n)



abandonment of wells;



(o)



rig dismantling and site completion;



(p)



reclamation for abandonment;



(q)



noise control;



(r)



debris disposal; and



(s)



protection of natural drainage and water flow.



Subject to the provisions of the Law on the protection of the environment, any new

project or expansion or modernization projects for Petroleum Operations for which a

proposal, other than a Plan, is submitted by Contractor or Operator, NOC shall

consider the assessment of the project and convey a decision with respect to

environment clearance within a period of ninety (90) days from the receipt of the

requisite documents and data. Subject to receipt of the necessary environmental



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



clearance, the JMC or BOD shall decide upon the proposal of Contractor or Operator

within thirty (30) days thereafter

41.10 Contractor and Operator shall ensure that:

(a)



the pertinent completed environmental impact studies are made available to

its employees and to its Sub-Contractors to develop adequate and proper

awareness of the measures and methods of environmental protection to be

used in carrying out Petroleum Operations; and



(b)



the contracts entered into between Contractor and Operator and SubContractors relating to Petroleum Operations shall include the provisions

stipulated herein and any established measures and methods for the

implementation of Contractor's obligations in relation to the environment

under this Contract.



41.11 Operator shall, in conjunction with Contractor, prior to conducting any drilling

activities, prepare and submit for review and approval by NOC contingency plans for

dealing with crude oil spills, fires, accidents and emergencies, designed to achieve

rapid and effective emergency response. The plans referred to above shall be

discussed with NOC and concerns expressed shall be taken into account.

(a)



In the event of an emergency, accident, oil spill or fire arising from Petroleum

Operations affecting the environment, Operator shall immediately notify NOC

and Contractor and shall promptly implement the relevant contingency plan

and perform such site restoration as may be necessary in accordance with

Best International Petroleum Industry Practices.



(b)



In the event of any other emergency or accident arising from Petroleum

Operations which may affect the environment, Contractor and Operator shall

take such action as is prudent and necessary in accordance with Best

International Petroleum Industry Practices.



41.12 In the event that Contractor and Operator fail to comply with any of the terms

contained in Article 41.11 NOC, after giving Contractor and Operator reasonable

notice in the circumstances, may take any action which may be necessary to ensure

compliance with such terms and to recover from Contractor, immediately after having

taken such action, all costs and expenditures incurred in connection with such action

together with such interest as may be determined in accordance with Annex C.

41.13 Where the Contract Area is partly located in areas forming part of certain national

parks, sanctuaries, mangroves, wetlands of national importance, biosphere reserves

and other biologically sensitive areas, passage through these areas shall generally

not be permitted. However, if there is no passage other than through these areas to

reach a particular point beyond these areas, permission of the appropriate authorities

shall be obtained by NOC for the benefit of Contractor.

41.14 The obligations and liability of Contractor with respect to the environment under this

Contract shall be limited to damage to the environment which:

(a)



occurs after the Effective Date and prior to the expiry or termination of this

Contract; and



(b)



results from an act or omission of Contractor and Operator.



41.15 Except for cases of Gross Negligence and Willful Misconduct on the part of

Contractor and/or Operator, all costs incurred towards protection of the environment

shall be treated as Petroleum Costs.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



41.16 Any costs approved by the NOC and incurred by the Contractor in remediation of

conditions existing prior to the Effective Date and identified in the first study noted in

Article 41.6 shall be considered Supplementary Costs.

41.17 In the event that Petroleum Operations are delayed, curtailed or prevented due to

extended delays in acquiring necessary environmental approvals, the Parties shall

meet and agree an appropriate extension of the Term together with all rights and

obligations hereunder, subject to the provisions of Article 8.

(End of Article 41)

ARTICLE 42 – SITE RESTORATION AND DECOMMISSIONING

42.1



On expiry or termination of this Contract or relinquishment of part of the Contract

Area, Contractor and Operator shall, subject to Article 5, remove all equipment and

installations from the relinquished area or former Contract Area in a manner agreed

with NOC pursuant to an abandonment plan; and



42.2



At about mid-Term, or as otherwise required by NOC, Contractor and Operator shall

prepare a proposal for site restoration including a decommissioning plan and a

"Decommissioning Reserve Fund". This proposal will be submitted for approval by

the JMC or BOD and endorsement of the NOC. Once the Decommissioning Reserve

Fund is established, Contractor shall make regular contributions to the

Decommissioning Reserve Fund based upon estimated site restoration and

decommissioning costs in accordance with standard principles and technical norms

generally accepted in the international petroleum industry, and taking into account

interest received and future interest expected to be earned on the Decommissioning

Reserve Fund. Any paid contributions by Contractor into the Decommissioning

Reserve Fund shall be deemed as Petroleum Costs.

The Decommissioning Reserve Fund shall be placed with a first rate international

bank approved by the JMC or BOD.

Upon expiry or termination of this Contract and takeover by NOC of Petroleum

Operations in the Contract Area:



42.3



(a)



the NOC shall become liable for future site restoration and decommissioning;



(b)



the contributions and any interest accrued in the Decommissioning Reserve

Fund, to the extent that such contributions have been recovered as Petroleum

Costs, shall be paid to NOC; and



(c)



the NOC shall release Contractor from any obligations relating to site

restoration and decommissioning and shall indemnify Contractor for any

costs, liabilities, claims or obligations associated therewith.



If Contractor undertakes Contract Area site restoration and decommissioning works,

the contributions and any interest accrued in the Decommissioning Reserve Fund

shall be utilized to pay Contractor for the cost of restoration and decommissioning

operations. NOC shall bear the shortfall or collect the excess of the

Decommissioning Reserve Fund.

(End of Article 42)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 43 – GENERAL BUSINESS ETHICS

43.1



In the performance of this Contract, Contractor's entities, Operator and NOC shall

ensure that they each strictly comply with general business ethics.



43.2



Contractor and Operator shall in their subcontracts stipulate their right to terminate

the subcontracts with immediate effect in case of violation of the general business

ethics by the Sub-Contractor and Contractor and Operator shall terminate a

subcontract in case of such a violation if NOC requests Contractor and Operator to

do so.



43.3



Neither Contractor's entities, Operator nor NOC shall give or receive from any

director, employee or agent of the other or its Affiliate in connection with this

Contract, any gift, entertainment or other benefit of more than minimal cost or value

or any commission, fee or rebate and any hospitality will be kept within reasonable

limits.



43.4



Each of NOC and Contractor's entities warrant that it and its Affiliates have not made,

offered, or authorized, requested, received, or accepted and will not make, offer, or

authorize, request, receive or accept with respect to the matters which are the

subject of this Contract, any payment, gift, promise or other advantage, whether

directly or indirectly through any other person or entity, to or for the use or benefit of

any public official (i.e. any person holding a legislative, administrative or judicial

office, including any person employed by or acting on behalf of a public agency, a

public enterprise or a public international organization) or any political party or

political party official or candidate for office, where such payment, gift, promise or

advantage would violate (i) the Law; (ii) the laws of the country of incorporation of

such entity or such entities ultimate parent company and of the principal place of

business of such ultimate parent company; or (iii) the principles described in the

Convention on Combating Bribery of Foreign Public Officials in International

Business Transactions, signed in Paris on December 17, 1997, which entered into

force on February 15, 1999. Each entity shall defend, indemnify and hold the others

harmless from and against any and all claims, damages, losses, penalties, costs and

expenses arising from or related to, any breach by such first entity of such warranty.

Such indemnity obligation shall survive termination or expiration of this Contract.

(End of Article 43)



IN WITNESS WHEREOF, the Parties hereto have executed this Contract in three originals

(each in Arabic and English) at

,

, on the day and

Year first above written.

For and on behalf of NOC

________________Witness

_________________

For and on behalf of Contractor

_________________Witness

_________________

(Company)

_________________Witness

_________________



49



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



(Company)

_________________Witness

_________________

(Company)

__________________Witness

_________________

(State Partner)



50



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ANNEX A – DESCRIPTION OF CONTRACT AREA

This Annex A is attached to and made part of the Service Development and Production

Gas Field.

Contract for

The Contract Area is defined by the corner points numbered from A to

connected by straight lines as shown in Annex B. The U.T.M. coordinates of corner points

are given hereunder.

Where as a result of Appraisal and Development Operations it appears reasonably likely to

the Parties that the Field is larger than originally delineated and extends beyond the Contract

Area originally established in respect thereof, then NOC may grant to Contractor, subject to

any prior grants of rights over the relevant area to a third party, an additional surface area

outside the original Contract Area so that the Field may be fully contained within the

extended Contract Area.

U.T.M. Coordinates

POINTS

A

B

C

D



NORTHING



(End of Annex A)



51



EASTING



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ANNEX B – MAP OF CONTRACT AREA

This Annex B is attached to and made part of the Service Development and Production

Gas Field.

Contract for the



.



(End of Annex B)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ANNEX C – ACCOUNTING PROCEDURE

This Annex C is attached to and forms part of the Service Development and Production

Gas Field.

Contract for the

ARTICLE 1 – GENERAL PROVISIONS

1.1



Definitions

Terms used in this Accounting Procedure shall have the meanings ascribed to them

in this Contract. In addition:

"Material" shall mean and include any and all materials, equipment, machinery,

articles and supplies; and

"Operating Account" shall mean the account or set of accounts maintained by

Contractor and Operator to record Petroleum Costs.



1.2



Purpose of Accounting Procedure

The purpose of this Accounting Procedure is to establish methods and rules of

accounting for Petroleum Operations under this Contract.

Any procedure established herein may only be modified by mutual agreement of the

Parties.



1.3



Operating Account and Records

(a)



Contractor and Operator shall open and maintain all accounts and records

necessary to document in reasonable detail and in separate accounts the

transactions relating to Petroleum Operations, in accordance with generally

accepted and recognized accounting principles consistent with modern

international petroleum industry practices, all in accordance with and subject

to the provisions of this Contract.

The accounts and records should show, among other things, the following:

(i)



(b)



Costs of assets including the cost of:

1.



drilling in general and cost of each well;



2.



production facilities such as flow lines and degassing stations in

sufficient detail;



3.



Crude Oil and Gas pipelines;



4.



tank-farms and pumping stations; and



5.



infrastructure facilities and industrial centers.



(ii)



Costs of Materials including the cost and quantity of each item. The

method of pricing should be stated.



(iii)



Operating costs analyzed by main items such as salaries, Materials

and services as defined or described in this Accounting Procedure.



Contractor's and Operator’s books shall be kept in Iraq in the English

language with an Arabic summary. All transactions shall be recorded in



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Dollars in accordance with the provisions of Article 20 of this Contract.



1.4



(c)



Accounts may be kept according to the usual accounting system of Operator.



(d)



Contractor and Operator shall maintain appropriate cost control records to

meet the requirements and obligations under this Contract.



(e)



Petroleum production, storage and transfer records shall be maintained

according to this Contract and consistent with modern international petroleum

industry practices.



(f)



Expenditures shall be charged in Dollars as follows:

(i)



all Dollar expenditures shall be charged in the amount incurred;



(ii)



for accounting purposes, all Dinar expenditures shall be translated into

Dollars at the exchange rate prevailing on the date of the relevant

expenditure in accordance with the regulations of the Central Bank of

Iraq;



(iii)



expenditures in currencies other than Dollars or Dinars, shall be

charged in the equivalent amount in Dollars using the actual exchange

rate applied by the relevant first class international bank on the date of

payment;



(iv)



a record shall be kept of the exchange rates actually used in

converting Dinars and other non-Dollar expenditures into Dollars; and



(v)



on the date of each balance sheet, monetary items in currencies other

than Dollars shall be translated to Dollars at the rate of exchange

applicable on such balance sheet date.



Statements

(a)



Quarterly Statements

Contractor and Operator shall submit to NOC within forty five (45) days from

the end of each Quarter, a statement of Petroleum Costs and Supplementary

Costs together with reports and statement of the Operating Account of the

said Quarter.



(b)



Yearly Statements

Contractor and Operator shall submit to NOC within three (3) months from the

last day of each Calendar Year, a statement of Petroleum Costs and

Supplementary Costs together with reports and a statement of the Operating

Account of the said Calendar Year.



1.5



Audits

Yearly statements shall be supported by a report issued by an independent auditor of

international qualification appointed according to Article 20.4 of this Contract. The

auditor report shall include a statement that the accounts and statements are

prepared according to the terms and conditions of this Contract and this Accounting

Procedure.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



(End of Article 1)

ARTICLE 2 – OPERATING ACCOUNT

Subject to the provisions of this Contract and this Accounting Procedure, Contractor shall

charge the Operating Account with Service Fees and Supplementary Fees. Pursuant to

Article 19 of this Contract, Petroleum Costs and Supplementary shall start being charged as

from the Effective Date, while Remuneration Fees shall start being charged as from First

Commercial Production.

The Remuneration Fee per Barrel shall be computed pursuant to Article 19.5 of this Contract

and charged accordingly to the Operating Account. Petroleum Costs shall be prepared on a

cash basis and shall include, but not be limited to, the following items unless such items

would otherwise qualify as Supplementary Costs:

2.1



Personnel

(a)



Operator's Locally Recruited Personnel

The actual cost of all Operator's locally recruited personnel who are engaged

in Petroleum Operations shall be charged as Petroleum Costs. Such costs

shall include gross pay, all personnel benefits, employer contributions, taxes

and other assessments levied on Operator as an employer by Government

authorities, transportation and relocation costs of the personnel and such

personnel's family within Iraq or elsewhere on temporary assignment in the

interest of Petroleum Operations (provided that no relocation costs for the

personnel's family shall be charged if the temporary assignment is for less

than six (6) consecutive Months) and such other costs as are statutory or

customary for Operator. This procedure shall also be applied with respect to

personnel of NOC seconded to Operator.



(b)



Assigned Personnel

The cost of the personnel of Operator’s Affiliates working in Iraq or in

countries other than the country of Operator (hereafter referred to as

“Countries of Assignment”) for Petroleum Operations on a long term

assignment (more than six (6) consecutive Months). The cost of these

personnel shall be as per rates or actual cost, as the case may be,

representing the Operator's Affiliates actual cost which is consistent with the

standard employment policies of the head office Affiliate or of other Affiliates

employing such personnel.

These rates shall include all costs of salaries, wages, benefits, indemnities

and social charges according to laws, regulations or contractual agreements

applicable to such personnel. In addition, they shall include reimbursement of

personnel administrative charges according to the standard practice of

Operator’s Affiliates.

The charges for personnel assigned on a temporary basis (less than six (6)

consecutive Months) shall be made in accordance with Article 2.5(c) of this

Annex C.



(c)



Personnel Engaged in Other Activities

If local personnel or assigned personnel are engaged in other activities in Iraq



55



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



in addition to Petroleum Operations, the cost of such personnel or assigned

personnel shall be allocated on a time sheet or pro rata basis according to

sound and acceptable accounting principles.

(d)



Training Costs

All costs and expenses incurred by Operator, Contractor and/or its Affiliates in

organizing, setting up and conducting training activities for their Iraqi

personnel engaged in Petroleum Operations or Contractor’s training activities

under Addendum Two, including the planning, designing, constructing,

commissioning and running training facilities and the related software.

All such training costs shall be subject to the JMC or BOD prior approval.



2.2



Materials

The cost of Materials purchased for or furnished to Petroleum Operations as detailed

under Article 4.1 of this Annex C hereinafter.



2.3



Transportation

(a)



Transportation of Personnel and Materials

The cost of transportation of Materials necessary for the performance of

Petroleum Operations, including costs of packaging, brokerage, insurance

and other related costs. Personnel transportation costs, to the extent covered

by the established policy of Operator, shall include travel expenses for

personnel and their immediate families to and from the personnel's points of

origin at the time employment commences, at the time of final departure and

for vacations, as well as travel expenses in Iraq for personnel and their

immediate families incurred as a result of transfers from one location to

another, and travel expenses relating to the periodical recuperation leaves of

field personnel. Costs related to immediate families shall be charged for

personnel assigned to work in Iraq for periods exceeding six (6) consecutive

Months.



(b)



Transportation Facilities

All costs and expenses for the Transportation Facilities according to Article

17.7 of this Contract and Addendum Two attached thereto.



2.4



2.5



Buildings and Equipment

(a)



Costs of buildings, equipment, furniture and fixtures, the maintenance thereof

and related costs; rents paid for all offices, houses, warehouses and other

types of buildings and costs of supplies necessary for the operation of such

buildings and facilities, all in Iraq.



(b)



Costs of vehicles and their maintenance and operation.



(c)



Costs of computers and software and their maintenance and operation.



Services

The services required by Operator for Petroleum Operations which may include but

are not limited to:

(a)



outside services of consultants, contract services, utilities and other services

procured from outside sources; rentals or compensation paid for the use of



56



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



any equipment and facilities;

(b)



use of equipment and facilities of Operator for Petroleum Operations on a

rental basis at rates to be approved by the JMC or BOD;



(c)



all Specific Services performed under an assistance agreement between

Operator and its head office Affiliate;

"Specific Services" shall mean services, activities, studies and projects of a

technical nature, as well as computer services, carried out or procured by the

head office Affiliate at the Operator’s specific request under a purchase order

procedure, for the benefit of Petroleum Operations. Specific Services shall

also mean studies and specific tasks such as, administrative, accounting,

financial, and legal services when requested by Operator under a purchase

order; and

Specific Services shall be charged at cost in accordance with the tariffs and

price lists established each Year by the head office Affiliate and approved by

the JMC or BOD for each Calendar Year.



2.6



Damages and Losses

All costs or expenses necessary to replace or repair damages or losses incurred by

fire, flood, storm, theft, accident or any other cause not controllable by Contractor

and Operator through exercise of reasonable care and diligence in operations and

not resulting from Contractor and Operator’s failure to timely file and diligently pursue

claims against insurance companies. Contractor and Operator shall furnish NOC with

written notice with details of damages or losses sustained in excess of ten thousand

Dollars (US$10,000) per occurrence as soon as practicable.



2.7



Legal Expenses

All costs and expenses of litigation or arbitration, or legal services necessary or

expedient for the protection of the Contract Area against third party claims, including

attorney's fees and expenses as hereinafter provided, together with all judgments

obtained against the Parties or any of them on account of Petroleum Operations

under this Contract, and actual expenses incurred by Contractor and/or NOC in

securing evidence or expert advice for the purpose of defending any such action or

claim pursued or urged in connection with operations under this Contract.

In the event actions or claims affecting the Parties' interests under this Contract shall

be handled by the legal staff of NOC in Iraq, a compensation commensurate with

cost of providing and furnishing such services shall be paid to NOC and charged to

the Operating Account.



2.8



Taxes

Pursuant to Article 23 and subject to other provisions of this Contract, taxes (other

than corporate income tax), levies, duties, imposts (if any) and/or charges and fees

paid by Contractor and Operator (but not previously paid directly by NOC) to

Government authorities as assessed or levied upon or in connection with Petroleum

Operations.



2.9



Insurance and Claims

(a)



The premium of any insurance policy secured by Operator pursuant to this

Contract.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



2.10



(b)



Any costs sustained by Contractor and Operator arising out of an event

covered by insurance. Such costs include, but are not limited to, repairs and

replacements of Materials in the Contract Area resulting from damages or

losses incurred because of fire, flood, storm, theft, accident, or any other

similar risk.



(c)



All costs and expenses associated with suing, working or travelling for, or any

other cost incurred because of insurance related disputes or litigation with any

party including any insurer and/or any insurer’s representatives or agents to

the extent that such costs and expenses are not refunded for whatever

reasons, by insurance and/or not awarded by an arbitrator or a court of law.



(d)



Any compensation received, or any claim collected from insurers or third

parties shall be credited to the Operating Account. If no insurance is carried

for a particular risk, all related actual expenditures incurred and paid by

Contractor in settling any and all losses, claims, damages, judgment and

other expenses, including related legal expenditures. Any such loss, claim or

damage shall be charged to the Operating Account unless it is a direct result

of Contractor's and Operator’s failure to act in accordance with the standards

of insurance required by this Contract or instructions of the JMC or BOD.



Currency Exchange

The gain or loss, if any, through currency translation or exchange pursuant to the

provisions of Article 21 of this Contract and Article 1.3(f) of this Accounting

Procedure.



2.11



Tariffs

Subject to the provision of Article 3 of the Annex, all sums paid to NOC, contractor(s)

on petroleum fields other than the Field, or any third party in compensation for the

use of facilities in connection with Petroleum Operations such as, but not limited to,

pipelines, hydrocarbon treatment plants and storage facilities, on a basis of a

mutually agreed tariff.



2.12



Surface Rights

All direct costs attributable to the acquisition, renewal or relinquishment of surface

rights acquired and maintained in force for Petroleum Operations in Iraq.



2.13



Environment

All costs incurred for the protection, cleanup or restoration of the environment

pursuant to this Contract and applicable laws and regulations.



2.14



Administrative Overhead and General Expenses

The services of all personnel of Contractor’s head office or its Affiliates not otherwise

chargeable, as well as the contribution of Contractor’s head office or its Affiliates to

Petroleum Operations of an intangible nature and any overhead or its indirect cost

incurred by Contractor’s head office or its Affiliates shall be compensated by a

charge based on one percent (1%) of total expenditure during each Calendar Year or

a fraction thereof.

The basis of applying this percentage shall be the total cost and expenses incurred in

respect of Petroleum Operations and charged under this Accounting Procedure to

the Operating Account during each Financial Year or fraction thereof but excluding

Historical Cost mentioned in Article 27.2 of this Contract and excluding administrative



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



overhead as allowed in this section.

From the Date of Transfer of Operatorship pursuant to Article 9 of this Contract, the

payment for the above administrative overhead charges shall be shared equally

between Contractor and NOC.

2.15



To the extent any of the costs identified in Article 2 of this Annex C would qualify as

eligible costs pursuant to Articles 4, 7.3, 12.7, , or 41.16 of this Contract, such costs

shall be considered Supplementary Costs and not Petroleum Costs.

(End of Article 2)



ARTICLE 3 – INFORMATION TO JMC OR BOD AND NOC

Upon submitting the annual Work Program and Budget for approval in accordance with

Article 12 of this Contract, Operator shall provide in writing the following details in respect of

personnel, Specific Services and tariffs in connection with Petroleum Operations to be

charged during the relevant Year.

3.1



3.2



3.3



Regarding Personnel Costs

(a)



Estimate of the overall amount thereof.



(b)



Analysis and explanation of the applicable personnel policy and practice of

Operator and Operator’s Affiliates.



(c)



Reasonable breakdown of the aforesaid expenditures as per details stated in

this Accounting Procedure.



(d)



Rates and/or methods of apportionment of such costs.



Regarding Specific Services

(a)



Estimate of the overall amount thereof.



(b)



Reasonable breakdown of such services by major type.



(c)



Tariffs and rates expected to apply with respect to such services, especially

assigned personnel.



Regarding Tariffs

(a)



Estimate of the overall amount to be paid.



(b)



Reasonable breakdown of the tariff expenditures.

(End of Article 3)



ARTICLE 4 – CHARGING PRINCIPLES

4.1



Purchases

(a)



All Materials purchased for Petroleum Operations shall be purchased at

competitive prices from reputable manufacturers and suppliers.

Materials and equipment purchased from third parties shall be charged at the

net cost paid by Contractor after deduction of all discounts received. Net cost

shall include but not be limited to such items as transportation, insurance,



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



license fees and purchasing and forwarding costs.

(b)



4.2



The Parties may furnish New Materials from their own stock provided that the

New Material transferred from the warehouses or other facilities of

Contractor's entities or their respective Affiliates shall be priced at cost, and

provided that such cost is not higher than the prices for New Materials of the

same quality, obtained on comparable terms and conditions, prevailing in the

international market at the time such Materials were supplied to Contractor

and Operator.



Direct and Indirect Costs

Costs shall be charged to the Operating Account using consistent methods from Year

to Year, and such methods shall be agreed upon by the Parties subject to the

following principles:



4.3



(a)



costs that may be directly charged to a relevant subdivision of the Operating

Account shall be so charged; and



(b)



costs that cannot easily be charged directly to any subdivision of the

Operating Account shall be apportioned either on a time basis or on a pro rata

basis. Costs of services that can not be assessed accurately may be charged

according to standard rates and adjusted to actual costs at Year end.



Use of Equipment and Facilities Owned by Entities Constituting Contractor

For the use of any equipment or facilities that are wholly owned by entities

constituting Contractor, the Operating Account shall be charged a rental

commensurate with the cost of ownership.

The rental rates, which will not include any profit element, will be approved by the

JMC or BOD each Calendar Year. Such rates should be in line with those currently

prevailing in the area where Petroleum Operations are located for equipment and

facilities comparable in terms of availability, safety, efficiency and quality.

(End of Article 4)



ARTICLE 5 – INVENTORIES

At all times, Contractor and Operator shall maintain inventories of Materials at optimum

levels required for Petroleum Operations and shall be subject to:

5.1



Periodic Inventories, Notices and Representation

At reasonable intervals, and at least once annually, inventories shall be taken by

Contractor and Operator of the Materials charged to the Operating Account, which

shall include all such Materials as are ordinarily considered controllable by operators

in the international petroleum industry. Written notice of intention to take inventory

shall be given by Contractor and Operator at least ninety (90) days before any

inventory is to begin so that NOC may be represented when any inventory is to be

carried out.



5.2



Reconciliation and Adjustment of Inventories

Reconciliation of inventory with the Operating Account shall be made and a list of

overages and shortages shall be furnished to NOC. Inventory adjustments shall be

made by Contractor and Operator to the Operating Account if required; provided,



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



however, that any inventory adjustment exceeding a value of ten thousand Dollars

(US$10,000) shall be reported to NOC.

(End of Article 5)

ARTICLE 6 – DISPOSAL OF MATERIALS

Contractor and Operator shall inform the JMC or BOD and NOC of any excess or disposable

Materials. NOC shall instruct Operator on the action then required. Any proceeds of disposal

of such Materials shall be credited to the Operating Account.

(End of Article 6)

ARTICLE 7 – SUMS RECEIVED FROM THIRD PARTIES

All sums received by Contractor from any third party in compensation for the use of facilities

utilized by Operator for Petroleum Operations shall be credited to the Operating Account.

(End of Article 7)

ARTICLE 8 – BASIS OF ACCOUNTING

The Operating Account may be maintained on an accrual basis, that is, costs shall be

recorded and entered in the Operating Account when the liability thereto first arises, and

revenues shall be recorded and entered in the Operating Account when the title thereto is

acquired.

However, for the purposes of cost recovery as per Article 19 of this Contract, the relevant

calculations shall be made on a cash basis, that is, costs shall be considered only when paid

and revenues only when collected.

(End of Article 8)

ARTICLE 9 – PAYMENT OF SERVICE FEES AND SUPPLEMENTARY FEES

Contractor shall, pursuant to Article 19 of this Contract, render to NOC as promptly as

practical but not later than forty-five (45) days after the end of the last Month of a Quarter, an

invoice of due and payable Service Fees and Supplementary Fees for the Quarter based on

the Operating Account and showing the following details:

9.1



Due Service Fees and Supplementary Fees brought forward from the previous

Quarter, if any;



9.2



Service Fees and Supplementary Fees during Quarter;



9.3



Total Service Fees and Supplementary Fees for the Quarter (9.1 + 9.2);



9.4



Service Fees and Supplementary Fees received by Contractor for the Quarter;



9.5



Amount of Service Fees and Supplementary Fees to be carried forward into the

succeeding Quarter if any (Articles 9.3 – 9.4), and



9.6



Excess, if any, of the value of Service Fees and Supplementary Fees received by

Contractor over Service Fees and Supplementary Fees due for the Quarter (9.4 –

9.3). Such excess shall be set off in the next calculation of Contractor's outstanding



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Service Fees and Supplementary Fees payable in the immediately succeeding

Quarter in accordance with Article 19 of this Contract.

(End of Article 9)

ARTICLE 10 – NON-RECOVERABLE COSTS

Unless otherwise provided elsewhere in this Contract, the following list of items shall be

treated as non-recoverable costs for the purpose of cost recovery:

10.1



costs incurred as a result of any proven Gross Negligence or Willful Misconduct of

Contractor and Operator including any amount paid in settlement of any claim

alleging Gross Negligence or Willful Misconduct whether or not Gross Negligence or

Willful Misconduct is admitted or whether such sum is stated to be paid on an exgratia or similar basis;



10.2



replacement and/or repair costs in respect of assets or other property which is

uninsured or under-insured, and liability incurred to third parties on the basis of strict

liability, where Contractor and Operator has agreed with NOC to insure against such

loss and has failed to do so;



10.3



any expenditure incurred directly or indirectly in connection with the raising of money

to finance Petroleum Operations and other incidental costs and charges related

thereto by whatever method raised; such expenditure includes, but is not limited to,

interest, commissions, fees and brokerage;



10.4



any costs, charges or expenses including donations relating to public relations or

enhancement of Contractor’s corporate image and interests;



10.5



any expenditure incurred which is not related to Petroleum Operations or on matters

or activities beyond the Delivery Point(s);



10.6



corporate income tax;



10.7



Training, Technology and Scholarship Fund; and



10.8



any other expenditure which is stated elsewhere in this Contract to be nonrecoverable expenditure.

(End of Article 10)



ARTICLE 11 – CONTROL STATEMENTS AND MAJOR ACCOUNTS

11.1



Contractor shall annually prepare, from the statements of expenditure prepared

pursuant to Article 1.4 hereof a statement showing for the relevant Year the excess

or deficit in development expenditure compared to the Minimum Work Obligations.

Such statement shall be rendered to NOC not later than ninety (90) days following

the end of such Year.



11.2



For the purpose of classifying costs, expenses and expenditures for cost recovery

and Minimum Work Obligations, costs, expenses and expenditures shall be recorded

in major accounts including Capital Cost and Operating Cost.

(End of Article 11)



ARTICLE 12 – TRANSFER PROCEDURE FOR THE OPERATING ACCOUNT



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



12.1



In accordance with Article 9.7 of this Contract, when the Joint Operating Company

becomes the Operator, the former Operator shall transfer to the Joint Operating

Company all the accounting records relating to the Operating Account.



12.2



In conducting the transfer of the books of account and the inventory of all properties

in accordance with the provisions of this Accounting Procedure, the implementation

procedure for the transfer and verification, the accounting files to be transferred and

accounting matters to be settled as well as other details, shall be agreed in advance

by the former Operator and the Joint Operating Company. The transfer procedure

shall be completed within the period agreed upon by the Parties. Thereafter, owing to

the needs of any shareholder, the Joint Operating Company shall allow such

shareholder's staff access to the books of accounts within the relevant periods and

provide them with duplicates of the relevant accounting records, if necessary.

(End of Article 12)



ARTICLE 13 – EXTERNAL AUDITOR’S CERTIFICATE

Contractor shall provide NOC with a certificate from the external auditor of Contractor's

Operator's head office Affiliate confirming that the charges and the rates applied pursuant to

Articles 2.1(a) to 2.5(c) of this Annex C represent actual costs.

(End of Article 13)

(End of Annex C)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ANNEX D – DEFINITION OF RESERVOIRS

This Annex D is attached to and made part of the Service Development and Production

Contract for the _____________ Field.

SECTION 1 – DISCOVERED RESERVOIRS

Following are the discovered reservoirs, which are projected for development within the

scope of this Contract.

(a)



RESERVOIR

The



(b)



reservoir includes all the porous intervals of

to

m (from MSL) of

1 well and its lateral equivalents.

RESERVOIR



The

(c)



reservoir includes all the porous intervals of

to

m (from MSL) of

1 well and its lateral equivalents.

RESERVOIR



The



reservoir includes all the porous intervals of

to

m (from MSL) of

1 well and its lateral equivalents.



SECTION 2 – UNDISCOVERED POTENTIAL RESERVOIRS

The undiscovered potential reservoirs are all reservoirs which may exist below the base of

the

Formation, defined as

(from MSL) in

1 well and

its lateral equivalents.

(End of Annex D)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ANNEX E – MINIMUM WORK OBLIGATION

This Annex E is attached to and made part of the Service Development and Production

Field.

Contract for the .

Contractor shall carry out the following Minimum Work Obligations during the first three (3)

Years following the Effective Date:

SECTION 1 – PROGRAMS AND DEVELOPMENT PLANS

(a)



Pursuant to Article 11.1 of this Contract, Contractor shall prepare and submit

to the NOC the Preliminary Development Plan within a period not exceeding

six (6) months from the Effective Date.



(b)



Contractor shall prepare and submit to the NOC the Final Development Plan

within a period not exceeding thirty six (36) months from the Effective Date.



(c)



Pursuant to Article 11.2 of this Contract, Contractor shall prepare and submit

to the NOC the necessary annual Work Programs and corresponding

Budgets.



SECTION 2 – APPRAISAL PROGRAM

Within a period of thirty six (36) months from the Effective Date, Contractor shall:

(a)



square kilometers (

carry out a 3-D seismic survey of

on the Field, including processing and interpretation thereof;



km²)



(b)



drill

(

) Appraisal wells at the appropriate locations in

the Contract Area with the view to delineating and evaluating the undeveloped

reservoirs of the Field; and



(c)



carry out detailed geological and reservoir engineering studies, including 3-D

simulation for the reservoirs, and carry out detailed laboratory and reservoir

engineering studies to evaluate the most suitable recovery mechanism for all

of the reservoirs to the base of

expected to come into

production within the Final Development Plan, integrating all relevant available

data and information, including such data existing prior to the execution of the

Appraisal Program.



SECTION 3 – DEVELOPMENT WORK

Within a period of three (3) Years from the Effective Date, Contractor shall undertake

to:

(a)



(

convert

producing wells;



) existing wells and



(b)



perform engineering studies for initial production and initiate any engineering

studies required under the Final Development Plan;



(c)



build field gathering and treatment facilities necessary to cope with a potential

daily average production of up to

(

) MMSCFD;



(d)



build Gas transportation facilities as per the Preliminary Development Plan

beyond the Transfer Point;



(e)



commence development work for necessary infrastructure facilities required

for the subsequent phase of development in accordance with the Final



65



(



) Appraisal wells to



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Development Plan; and

(f)



commence building of permanent field gathering and production facilities.

(End of Annex E)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ANNEX F – FORMS OF GUARANTEE

FORM 1: FOR A COMPANY

We refer to the Service Development and Production Contract for ------ Gas Field

(hereinafter referred to as the "Contract") entered into on this day of …….. 2009, between

………X… and NOC, an Iraqi State gas company.

In consideration of the rights and obligations of ……..X……. being a wholly owned and

controlled Affiliate of ……..Y…….., as a Party to this Contract, ……Y…… , a company duly

organized and existing under the laws of ……………..…… and whose registered office is at

…………………………….., hereby undertakes to make available or cause to be made

available to …….X……… such technical and financial resources as may be required to

perform and fulfill its obligations under this Contract, as may be amended from time to time

by the Parties thereto, including payment to NOC of the balance (if any) of the Minimum

Expenditure Obligations in case of termination of this Contract, if applicable.

The obligations of …….Y …… hereunder shall be to the extent of the Participating Interest

that ….X…….may have at the time under this Contract.

This Guarantee shall extend to any Affiliate of …………X…….… which may become a Party

to this Contract.

This Guarantee shall come into force on the Effective Date of this Contract and shall remain

valid as long as …….X……, or its Affiliate, shall be bound by this Contract.

Signed for and on behalf of

(…………Y…………)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



FORM 2- FOR NOC, IRAQ OIL MARKETING COMPANY (SOMO), AND STATE

PARTNER

We refer to the Service Development and Production Contract for ------ Gas Field

(hereinafter referred to as the “Contract “) entered into on this day of……..2009, between ------ and NOC, an Iraq State company.

In consideration of the rights and obligations of NOC being a Party to this Contract and being

fully owned subsidiary of the Ministry of Oil of the Republic of Iraq.

The Ministry of Oil, hereby undertake to make available or cause to be made available to

NOC such financial and technical resources as may be required to perform and fulfill its

obligations under this Contract, as may be amended from time to time by the Parties thereto.

This Guarantee shall extend to the Oil Marketing Company (SOMO), the State Partner, and

any Affiliate of NOC or the Ministry, which becomes a party to this Contract.

This Guarantee shall come into force on the Effective Date of this Contract and shall remain

valid as long as NOC, SOMO, State Partner, and any other Affiliate of NOC or the Ministry,

shall be bound by this Contract.

Signed for and on behalf of Ministry of Oil

Name:

Title:

(End of Annex F)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ADDENDUM ONE – HEADS OF JOINT OPERATING AGREEMENT

This Addendum One is attached to and made part of the Service Development and

Production Contract for the

Gas Field. Terms defined in the Service Development

and Production Contract shall have the same meanings for the purpose of this Heads of

Agreement.

ARTICLE 1 – SCOPE

This Heads of Agreement is to provide for the basic principles to be included in a Joint

Operating Agreement ("JOA") to be executed among the Companies and the State Partner

(hereinafter referred to individually as "Participant" or collectively as “Participants").

(End of Article 1)

ARTICLE 2 – PARTICIPATING INTEREST

Each Participant shall have the undivided percentage interest determined under this Contract

and/or as agreed by the Participants ("Participating Interest"), provided that each

Participant's Participating Interest shall not be less than three point seven five percent

(3.75%). Each Company shall participate in proportion to its respective Participating Interest

in all costs, expenses and liabilities incurred pursuant to this Contract or JOA and shall own,

in the same proportion, the Contractor's rights under this Contract and the Participants' rights

under the JOA.

(End of Article 2)

ARTICLE 3 – CONTRACTOR'S OPERATOR

3.1



The Contractor's Operator appointed in accordance with this Contract, shall have

exclusive management and control of Petroleum Operations prior to the formation of

the Joint Operating Company.



3.2



Contractor's Operator may, at any time resign as such by giving the Participants

notice in writing. Contractor's Operator shall cease to be Operator if: (a) it dissolves,

liquidates or terminates its legal existence; (b) it becomes insolvent, bankrupt or is

placed in receivership; (c) its Participating Interest is reduced to less than seven point

five percent (7.5%); or (d) it takes no action within thirty (30) days after notification to

it by a Participant to remedy a material breach of the JOA. Pursuant to Article 9.3 of

this Contract, replacement of the Contractor's Operator shall be subject to NOC's

prior approval.

(End of Article 3)



ARTICLE 4 – OPERATING COMMITTEE

4.1



An Operating Committee composed of representatives of the Participants shall be

established and shall act for the duration of JOA to make decisions and establish

joint policies and make proposals to be submitted to the NOC, the JMC or the BOD,

as well as to make any other decisions necessary or expedient for the orderly

supervision and direction of the Petroleum Operations.



4.2



The decisions of the Operating Committee on all matters coming before it shall be



69



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



made by the affirmative vote of the representatives of the Participants having a

combined voting right of at least seventy percent (70%), each Participant being

entitled to have and to exercise through its representatives a voting right equal

numerically to its Participating Interest. Major issues shall be decided upon by the

unanimous vote of the Partners. The Operating Committee shall also decide upon

Contractor’s representation in the JMC or BOD, provided that Contractor’s Operator

shall have at least one (1) of the members provided to Contractor and the State

Partner shall have one (1) member.

(End of Article 4)

ARTICLE 5 – WORK PROGRAMS AND BUDGETS

For each Calendar Year, the Operator shall prepare and submit to the Participants Work

Programs and Budgets not later than the first day of August of the preceding Year. Each

such Work Program and Budget shall set out in a reasonably detailed manner the work to be

carried out and shall include an itemized estimate of the corresponding expenditures. The

Operating Committee shall review and discuss the Work Program and Budget submitted by

Operator for the following Calendar Year and shall adopt, not later than August 30, a Work

Program and Budget to be submitted to the Operator for further study and possible

modification before referring to the JMC or the BOD for final approval pursuant to Article

12.2.

(End of Article 5)

ARTICLE 6 – COSTS AND EXPENSES

All costs and expenses of the Contractor for Petroleum Operations in connection with this

Contract or JOA, shall be borne by the Companies in proportion to their respective

Participating Interest. All costs and expenses that are incurred in the conduct of operations

under JOA shall be determined and recorded according to an accounting procedure (without

prejudice to Annex C of this Contract) and generally accepted accounting principles and shall

be subject to periodic inspection and audit.

(End of Article 6)

ARTICLE 7 – DEFAULTS

7.1



Any Company that fails to pay when due its Participating Interest share of costs and

expenses shall be in default (hereinafter referred to as ("Defaulting Company"). The

Operator shall as soon as practicable notify all Participants of such default and the

Operator shall keep the Participants informed thereafter of material events in relation

thereto. The amount not paid by the Defaulting Company shall bear interest from the

date due until paid in full. After any default has continued for thirty (30) days, the

Defaulting Company 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. Non-Defaulting Partners (excluding State Partner) shall pay the

defaulted amount on behalf of the Defaulting Partner, in proportion to their

Participating Interests or in any other proportion they may agree upon.



7.2



The Defaulting Company shall have the right to remedy the default at any time prior

to forfeiture, as hereinafter provided, by payment in full to the Operator or, if the NonDefaulting Partners have paid any amounts under Article 7.1, to the Non-Defaulting

Partners, in proportion to the amounts so paid by them, of all amounts which the



70



Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Defaulting Company has failed to pay, together with interest thereon on a day to day

basis at the rate of LIBOR plus five percent (5%) per annum.

If a Defaulting Company has not remedied the default by the thirtieth (30th) day, then,

during the continuance of such default, the Defaulting Partner shall not be entitled to

its Participating Interest share of Service Fees, which shall vest in and be the

property of the Non-Defaulting Partners. The Service Fees due to the Defaulting

Partner shall proportionately be paid to the Non-Defaulting Partners, which Fees shall

be credited against all monies advanced by such Non-Defaulting Partners on behalf

of the Defaulting Partner. The balance of such fees, if any, shall be paid to the

Defaulting Partner when such default has been remedied.



7.3



State Partner shall be carried by the other Partners for its Participating Interest share

of Petroleum Costs and Supplementary Costs. The amount so paid by the

Companies on behalf of State Partner shall be fully recovered by the Companies

from the Petroleum Costs and Supplementary Costs paid under this Contract.

(End of Article 7)



ARTICLE 8 – WITHDRAWAL

After the Minimum Work Obligations have been fulfilled, any Company shall have the right to

elect, by giving notice to the other Participants, to withdraw from this Contract and the JOA.

Each of the other Companies may also give notice that it desires to withdraw from this

Contract and the JOA. Should all Companies give such notice of withdrawal, the Participants

shall proceed to abandon the Contract Area and terminate this Contract and JOA. If less than

all of the Companies give such notice of withdrawal, then the withdrawing Companies shall

execute and deliver all necessary instruments and documents to assign their Participating

Interest to the non-withdrawing Companies, without any compensation whatsoever. Such

assignment to the non-withdrawing Companies shall be in proportion to their Participating

Interests, unless otherwise agreed among them. The non-withdrawing Companies shall take

the assignment of all of the withdrawing Companies' Participating Interests; otherwise, the

Participants shall be deemed to have decided to withdraw from this Contract and the JOA.

(End of Article 8)

ARTICLE 9 – ASSIGNMENT

Each Participant may transfer, subject to any requirement under this Contract, all or part of,

its Participating Interest under this Contract and the JOA to a wholly-owned Affiliate without

the consent of the other Participants; provided that such Participant shall remain responsible

for the performance of the financial and other obligations under this Contract and the JOA to

the same extent as if the transfer had not occurred and provided further that the assigning

shall timely notify the other Participants of any such transfer. Without prejudice to the

provisions of this Contract, no transfer of any interest under this Contract and the JOA to

third parties may be made by any Participant without the written consent of the other

Participants which consent shall not be unreasonably withheld. The transfer by a Participant

of its interest under this Contract and the JOA to third parties shall be subject to NOC's

approval and its pre-emptive right and to the preferential rights of the other Participants. The

assignee or transferee shall be bound by this Contract and the JOA.

(End of Article 9)

ARTICLE 10 – RELATION OF THE PARTICIPANTS



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



The rights, duties, obligations and liabilities of the Participants under this Heads of

Agreement and the JOA shall be individual, not joint or collective. It is not the intention of the

Participants to create, nor shall this Heads of Agreement or the JOA be deemed or construed

to create a mining or other partnership, joint venture, association or trust, or as authorizing

any Participants to act as an agent, servant or employee for any other Participant for any

purpose whatsoever except as explicitly set forth in the JOA.

(End of Article 10)

ARTICLE 11 – GOVERNING LAW AND ARBITRATION

The JOA shall be governed by, construed, interpreted and applied in accordance with the

Law. Any dispute, controversy or claim arising out of or in relation to or in connection with the

JOA or the operations carried out thereunder, including without limitation any dispute as to

the validity, interpretation, enforceability or breach of the JOA, shall be settled by arbitration

in Paris, France, in accordance with the Rules of Conciliation and Arbitration of the

International Chamber of Commerce conducted in the manner contemplated in Article 37 of

this Contract.

(End of Article 11)

ARTICLE 12 – EFFECTIVE DATE AND TERM

This Agreement shall come into force on the Effective Date of and shall continue in effect

until this Contract expires, terminates or upon the Participants entering into the JOA,

whichever is the earlier.

(End of Article 12)

ARTICLE 13 – JOINT OPERATING AGREEMENT (JOA)

Within six (6) months from the Effective Date, the Participants shall enter into the Joint

Operating Agreement which shall embody the principles stipulated in this JOA Heads of

Agreement and it may include such other provisions as customarily used by international

petroleum industry and shall continue in effect as long as this Contract is in effect.

(End of Article 13)

(End of Addendum One)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ADDENDUM TWO – HEADS OF PETROLEUM TRANSFER AGREEMENT

ARTICLE 1 – DEFINITIONS

This Addendum Two is attached to and made part of the Service Development and

Gas Field. Terms defined in the Service Development

Production Contract for the

and Production Contract shall have the same meanings for the purpose of this Heads of

Petroleum Transfer Agreement.

(End of Article 1)

ARTICLE 2 – SCOPE

This Heads of Petroleum Transfer Agreement prescribes the basic principles to be included

in a Petroleum Transfer Agreement to be executed by and between the Operator and

Transporter for transportation of Petroleum produced from the Contract Area under this

Contract.

(End of Article 2)

ARTICLE 3 – SCOPE OF PETROLEUM TRANSFER AGREEMENT

Provided Operator complies with its obligations under this Contract and this Addendum Two

related to the Transportation System, Transporter shall receive at the Transfer Point the

quantities of Petroleum from the Contract Area tendered by Operator for transportation to the

Delivery Point.

(End of Article 3)

ARTICLE 4 – FACILITIES AT THE TRANSFER POINT

For the purpose of the transfer of Petroleum, Operator may use an area of land at the

Transfer Point and construct necessary facilities thereon.

(End of Article 4)

ARTICLE 5 – TRANSFER RATE

Operator shall have the right and the obligation to tender Petroleum at the Transfer Point at a

certain average rate as per the approved Development Plan. However, Operator in coordination with Transporter may transfer Petroleum at a peak rate up to twenty percent (20%)

above the approved average rate for temporary periods to compensate for operational

constraints. In the event that the throughput capacity of the pipeline system or the related

facilities is constrained for unforeseeable incidents beyond the control of the Operator or

Transporter and the throughput of Petroleum through the pipeline system is consequently

reduced, Operator shall reduce its deliveries accordingly. Any such reduction shall be on a

non-discriminatory basis.

(End of Article 5)

ARTICLE 6 – TRANSFER CONDITIONS



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Petroleum shall be transferred at the Transfer Point from one or more Petroleum streams in

accordance with the approved Development Plan, and at the pressure commensurate with

the pressure required by the existing system. The quality of each Petroleum stream

transferred at the Transfer Point shall be subject to certain conditions and specifications to

be agreed upon by Transporter and Operator. Operator shall not mix any additives to the

Petroleum tendered for transportation, without prior written approval of Transporter.

(End of Article 6)

ARTICLE 7 – MEASURING

Operator shall install, maintain and operate all facilities necessary for the measurement of

Petroleum at each Production Measurement Point. Operator shall notify NOC prior to any

calibration of such measurement facilities and allow NOC's representatives to attend such

calibration activities. Unless agreed otherwise by the Parties, any inaccuracy determined

during such calibration activities shall be deemed to have existed since the mid-point

between the last calibration and the current calibration.

Operation and calibration of the metering equipment and procedures for measurement and

sampling shall be in accordance with the prevailing standards of the international petroleum

industry. The Parties shall agree the procedure for measuring the volume and quality of

Petroleum and shall have the right of access to Production Measurement Points and the right

of witnessing calibration thereof.

(End of Article 7)

ARTICLE 8 – TRANSPORTATION SYSTEM

8.1



Unless related to obligations under Annex E, Operator and Contractor shall have no

obligation to build transportation facilities downstream of the Transfer Point unless

this is agreed and incorporated in a Development Plan. In the event such facilities

are built they shall be handed over to Transporter upon completion and

commissioning.



8.2



In case a need arises to de-bottleneck, improve the efficiency and/or to increase the

capacity of the Transportation System, NOC, Transporter, or Operator may propose

to construct facilities beyond the Transfer Point, in addition to or to modify the

existing Transportation Facilities. Operator shall participate in the building and

financing of the same in proportion to the production of the Field in relation with other

users and such participation shall be considered Supplementary Costs.



8.3



In the event that Contractor agrees to finance and build or improve such

transportation facilities, Operator shall ensure the participation of Transporter's

representatives during engineering and construction of the Transportation Facilities,

as well as the training of Transporter's personnel concerning operation and

maintenance to be conducted before handing them over to the Transporter. Operator

shall provide Transporter with all documents and guarantees relating to the said

Transportation Facilities. Operator and Transporter shall agree in advance on a

procedure for smooth hand-over of the Transportation Facilities after completion and

commissioning.

(End of Article 8)



ARTICLE 9 – EFFECTIVE DATE AND TERM



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



This Heads of Petroleum Transfer Agreement shall be valid and effective as from the

Effective Date and shall continue in effect until the expiry or termination of this Contract or

upon the Operator and Transporter entering into the Petroleum Transfer Agreement,

whichever is the earlier.

(End of Article 9)

ARTICLE 10 – GOVERNING LAW AND ARBITRATION

The Petroleum Transfer Agreement shall be governed by, construed, interpreted and applied

in accordance with the Law. Any dispute, controversy or claim arising out of or in relation to

or in connection with the Petroleum Transfer Agreement or the operations carried out

thereunder, including without limitation any dispute as to the validity, interpretation,

enforceability or breach of the Petroleum Transfer Agreement, shall be settled by arbitration

in accordance with the procedures set forth in Article 37 of this Contract.

(End of Article 10)

ARTICLE 11 – RELATED PROCEDURES

Procedures existing on the Effective Date for lifting, storage, tanker nomination and other

related activities may later be adjusted to support the efficient implementation of the Export

Oil Sales Agreement.

(End of Article 11)

ARTICLE 12 – PETROLEUM TRANSFER AGREEMENT



Within six (6) months from the Effective Date, the Operator shall enter into the

Petroleum Transfer Agreement with Transporter which shall embody the principles in

this Addendum Two and it may include such other provisions as customarily used by

the international petroleum industry and shall continue in effect for as long as this

Contract is in effect.

(End of Article 12)

(End of Addendum Two)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ADDENDUM THREE – HEADS OF CHARTER OF JOINT OPERATING COMPANY

This Addendum Three is attached to and made part of the Service Development and

Gas Field. Terms defined in this Contract shall have the

Production Contract for the

same meanings for the purposes of this Heads of Agreement. The parties to the charter

shall be the Parties to this Contract: NOC and Contractor.

ARTICLE 1 – ESTABLISHING OF THE JOINT OPERATING COMPANY

1.1



Pursuant to Article 9 of this Contract, a Joint Operating Company of limited liability

may be established under the Law. The JOC shall be formed within twelve (12)

months after NOC's decision to form the JOC, and shall commence the conduct of

Petroleum Operations on the Date of Transfer of Operatorship, which date shall be

within thirty (30) days after the formation of the JOC.



1.2



JOC shall be owned fifty percent (50%) by NOC and fifty percent (50%) by

Contractor. JOC will bear the Iraqi nationality and shall conduct its activities in

accordance with the provisions of this Contract, this Addendum Three and the

subsequent Charter of the JOC.



1.3



The authorized capital of the JOC shall be determined by mutual agreement in

accordance with the applicable Law. NOC and Contractor shall each pay for, hold

and own throughout the life of the JOC the capital stock of the JOC in accordance

with the percentage ownership stipulated in Article 1.2 herein above.



1.4



Contractor and NOC shall agree, at least three (3) months prior to the Date of

Transfer of Operatorship, on the procedure to secure a smooth transfer of Petroleum

Operations from Contractor's Operator to the JOC.

(End of Article 1)



ARTICLE 2 – JOC NAME

The name of JOC shall be [name of Gas Field] Operating Company.

(End of Article 2)

ARTICLE 3 – HEADQUARTERS OF JOC

The headquarters of the JOC shall be in Baghdad, Iraq, and it may have branch offices in

other cities in the Republic of Iraq.

(End of Article 3)

ARTICLE 4 – JOC OBJECTIVES

4.1



JOC shall assume the duties of the Operator to the extent they apply to the conduct

of Petroleum Operations, but on behalf of the Parties, and to the account of

Contractor, all in accordance with the provisions of this Contract and the charter of

the JOC.



4.2



JOC shall implement approved Development Plans, Work Programs and Budgets in

accordance with this Contract. JOC shall keep account of all costs, expenses and

expenditures for such Petroleum Operations under the terms of this Contract and

Annex C attached thereto.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



4.3



In conducting Petroleum Operations, the JOC and its Sub-Contractors enjoy the

same privileges and exemptions as Contractor or Operator to the extent these apply

to the conduct of Petroleum Operations by Operator, and shall comply with the Law.



4.4



JOC shall assume, as from the Date of Transfer of Operatorship, all the rights and

obligations of Contractor and/or Operator wherever they appear in this Contract to

the extent they are relevant to the conduct of Petroleum Operations by the Operator.



4.5



After the JOC has taken over conduct of Petroleum Operations and has become

Operator, Contractor shall have the obligation of joint management of the JOC and a

major role in all the planning, decisions, and day-to-day conduct of Petroleum

Operations. In general, Contractor shall make available to the JOC its managerial

and technological skills and personnel to ensure that Petroleum Operations are

performed in accordance with Best International Petroleum Industry Practices. In

particular, the establishment of the JOC shall in no way relieve Contractor of its

obligations to achieve the production targets under this Contract.

(End of Article 4)



ARTICLE 5 – FINANCING

The JOC shall have neither profit nor loss. Costs, expenses and expenditures, incurred and

paid by JOC to carry out Petroleum Operations shall be financed by Contractor and

recovered as Petroleum Costs or Supplementary Costs according to the approved Annual

Work Program and Budget in accordance with the provisions of this Contract.

(End of Article 5)

ARTICLE 6 – FUNCTION OF JOC

The JOC shall not own any right, title or interest under this Contract or in the Petroleum

produced from the Field, and shall not be required as a principal for any financing. JOC shall

function as Operator and shall assume all relevant responsibilities of Operator under this

Contract.

(End of Article 6)

ARTICLE 7 – BOARD OF DIRECTORS

7.1



A Board of Directors shall be formed for the purpose of overall supervision and

control of Petroleum Operations to be conducted by the JOC. This BOD shall consist

of eight (8) members, four (4) to be designated by NOC and four (4) to be designated

by Contractor, including one member from the State Partner. An alternate to each

member shall also be designated. The BOD shall assume its duties and authorities

as from the Date of Transfer of Operatorship. The chairman shall be designated by

NOC and the deputy chairman by Contractor.



7.2



Decisions of the BOD shall be taken by unanimous votes of the members or their

alternates present at the meeting. Quorum shall be at least three (3) members or

alternates of Operator or Transporter, including at least one member nominated by

NOC and one member nominated by Contractor's Operator. Decisions taken by the

BOD shall be recorded in official minutes signed by the members present and

communicated by JOC to the Parties.



7.3



All reasonable costs and expenses of the BOD shall be recovered as Petroleum



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Costs.

(End of Article 7)

ARTICLE 8 – DUTIES AND AUTHORITIES OF BOARD OF DIRECTORS

The BOD shall assume all the duties and authorities of the JMC as specified in Article 13.2 of

this Contract.

Additionally, the BOD shall have the following duties and authorities:

8.1



overall supervision and control of the conduct of Petroleum Operations by the JOC;



8.2



the establishment of the operating organization and procedure;



8.3



the structuring of the accounting system and of the financial controls as well as the

financial planning insofar as it is necessary to manage JOC;



8.4



the establishment of the procedures for the funding of Petroleum Operations by

Contractor;



8.5



the appointment and replacement of the General Manager, the Deputy General

Manager and the other senior divisional managers of JOC, and the definition of their

respective powers;



8.6



the establishment and update of the organization chart of JOC, including the

identification of the positions to be filled through secondment from NOC or Contractor

respectively and those to be filled through direct employment. The Contractor should

be prepared to fill positions within the JOC as and where required upon the request

of the BOD;



8.7



establishment of the employment procedures and personnel regulations of JOC;



8.8



prior approval of the terms of the service or secondment agreements to be entered

into by JOC with NOC and Contractor of this Contract; and



8.9



the duties and authorities provided for in Article 13.2 and that were performed by the

JMC prior to the Date of Transfer of Operatorship.

(End of Article 8)



ARTICLE 9 – MANAGEMENT

The General Manager and Deputy General Manager of JOC shall be appointed by the BOD

from candidates nominated by NOC and Contractor, respectively. Departmental Managers of

JOC shall be appointed by the BOD in consultation with the General Manager and Deputy

General Manager. The General Manager shall be the chief executive officer of the JOC.

(End of Article 9)

ARTICLE 10 – EMPLOYMENT REGULATIONS

The JOC shall give preference to Iraqi personnel in accordance with Article 9.19 of this

Contract.

Secondees of Contractor or NOC shall be exclusive to the operations of the JOC and shall



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



have no other work obligation or assignment within the organization supplying such

secondee, unless agreed by the NOC and Contractor’s Operator.

The BOD shall approve the regulations covering the terms and conditions of employment of

the personnel of JOC employed directly by JOC.

(End of Article 10)

ARTICLE 11 – LIABILITY

Liabilities shall be pursuant to this Contract.

(End of Article 11)

ARTICLE 12 – DURATION OF JOC

12.1



The duration of JOC shall extend up to the end of the Term, including any extensions

thereof.



12.2



Neither Contractor nor NOC shall assign, sell or otherwise transfer its interest in the

JOC except by mutual agreement; provided, however, that when a Company assigns

its interest under this Contract and Joint Operating Agreement to any party, its

interest in the JOC shall be assigned proportionately.

(End of Article 12)



ARTICLE 13 – DISSOLUTION OF JOC

The JOC shall be dissolved when this Contract expires or is terminated for any reason as

provided for therein.

(End of Article 13)

ARTICLE 14 – CHARTER OF JOC

By the Date of Transfer of Operatorship, the Parties shall enter into the charter of the JOC

which shall embody the principles set out in this JOC Heads of Agreement. Pending the

issue of the said charter, the provisions of this JOC Heads of Agreement setting forth the

principal terms of the charter shall apply as the provisional charter.

(End of Article 14)



ARTICLE 15 – MODIFICATION OF THE CHARTER OF JOC

Contractor and NOC may, by mutual agreement, modify the terms of the charter of the JOC

provided that such modification will not be in conflict with the provisions of this Addendum

Three or this Contract.

(End of Article 15)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ARTICLE 16 – HAND-OVER OF OPERATORSHIP

Operatorship including all books and records shall be transferred to JOC.

(End of Article 16)

ARTICLE 17 – GOVERNING LAW AND ARBITRATION

The Law shall apply to the JOC, if and to the same extent it applies to the Contractor,

Operator and/or this Contract in accordance with Article 29. To the extent that the Parties

determine that it would be appropriate to prepare a shareholders agreement in respect of

JOC, such shareholders agreement shall be governed by, and construed in accordance with,

the Law. Any dispute arising from or in connection with such shareholders agreement or the

charter of JOC shall be settled in accordance with Article 37 of this Contract.

(End of Article 17)

ARTICLE 18 – CONFIDENTIALITY

Confidentiality provisions of Article 33 of this Contract shall apply for this Heads of

Agreement, subsequent charter and operations of JOC.

(End of Article 18)

ARTICLE 19 – EFFECTIVE DATE AND TERM

This Heads of Agreement shall come into force on the Effective Date and shall continue in

effect until the earlier of Contract expiry, Contract termination or upon the Parties entering

into the charter of the JOC. The full charter of the JOC shall be entered into no later than six

(6) months from the NOC's decision to form the JOC.

(End of Article 19)

(End of Addendum Three)



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



ADDENDUM FOUR – HEADS OF EXPORT OIL SALES AGREEMENT

This Addendum Four is attached to and made part of the Service Development and

Production Contract of the

Gas Field. Terms defined in this Contract shall have the

same meanings for the purpose of this Heads of Agreement.

SPECIAL TERMS (PART 1)

ARTICLE 1 – DEFINITIONS

For the purpose of this Heads of Agreement, terms defined in this Contract shall have the

same meanings except the definition of the Parties.

"Parties" means Seller and Buyer.

"Buyer" means Contractor.

"Seller" means Iraq Oil Marketing Company "SOMO", on behalf and for the account of NOC.

“Lifting Quarter” means the Quarter during which Export Oil is available for lifting by

Contractor, under this Contract, at the Delivery Point where any Lifting Quarter shall be the

Quarter following a Quarter for which Service Fees are due and payable.

(End of Article 1)

ARTICLE 2 – QUANTITY

2.1



Forward Quantity Statement

No later than the first day of the first Month of the Quarter immediately preceding any

Lifting Quarter, Contractor shall invoice NOC the outstanding Service Fees and

Supplementary Fees due and payable to Contractor under this Contract as these will

stand on the first day of the said Lifting Quarter. NOC shall review the invoice and will

either confirm its accuracy, or advise Contractor of any errors. The invoice shall be

agreed by the 15th of said first Month.

Accordingly, no later than the first day of the second Month, the Buyer shall furnish to

the Seller a statement of the volume of Export Oil to be lifted from each standard

export quality in each Month of the said Lifting Quarter ("Forward Quantity

Statement"). The Forward Quantity Statement will be based on the Service Fees and

Supplementary Fees due and payable to Contractor as agreed by NOC, divided by

the relevant Export Oil Price which shall be determined in accordance with Article 18

of this Contract, applicable for the Month before the Forward Quantity Statement or

for the preceding Month if the former is not available ("Provisional Price"). However,

the volume of Export Oil to be lifted by Contractor in any Lifting Quarter shall not

exceed the upper limit set for payment of due Service Fees and Supplementary

Fees, and the balance of such Service Fees and Supplementary Fees, at the end of

the said Lifting Quarter, shall be carried forward, all pursuant to Article 19 of this

Contract and Annex C.

The price used for calculating the volume from each standard export quality for the

first Lifting Quarter shall be based on the monthly declared SOMO's official Export Oil

Price for that quality to be lifted during any month of the said Quarter.

The volumes of the different qualities of Export Oil to be lifted by the Buyer in a Lifting

Quarter shall be in the same proportion as the different qualities of Net Production



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



from the Field during the Quarter, or as otherwise agreed between the Seller and the

Buyer.

NOC shall review the Forward Quantity Statement, and will either confirm its

accuracy, or advise Contractor of any errors in the calculation of the volumes to be

lifted. The nominal quantity agreed for each Month may be varied by up to plus or

minus five percent (5%) as operational tolerance at the time of actual loading. Actual

quantity lifted is based on net bill of lading.

For smooth and timely lifting and reporting under this Agreement, the Parties may

establish a specialized "Joint Committee" with representatives from NOC, Contractor,

and SOMO.

2.2



Lifting Statement

The Seller shall furnish to the Buyer and the Joint Committee a statement setting out

the actual Barrels of the Export Oil lifted per Month during a Lifting Quarter and the

actual Price for the Month of lifting ("Lifting Statement"), within fifteen (I5) days after

the end of each Lifting Quarter. The Buyer shall review the Lifting Statement, and will

advise the Seller of any errors in the calculations contained therein, within fifteen (15)

days after receipt of the Lifting Statement, with a copy to the Joint Committee.

Notwithstanding the above, it is agreed that the final certified shipping documents

shall be controlling as to volumes lifted. Attachment A to this Agreement contains a

sample schedule of notifications, lifting and adjustments applicable for lifting during a

Year.



2.3



Seller's Option to Deliver Excess Volumes

The Seller may, at its option, elect to deliver excess Export Oil over and above the

offset volumes required in any Lifting Quarter under this Contract. The actual value of

any such excess Export Oil lifted by the Buyer under the price clause hereunder will

reduce the outstanding balance of due Service Fees and Supplementary Fees under

this Contract, as reflected in the then most current Quarterly report. If the Seller

wishes to exercise this option to deliver excess Export Oil in any Lifting Quarter, the

Seller must notify the Buyer of such election no later than the first day of the second

Month of the preceding Quarter.

(End of Article 2)



ARTICLE 3 – DELIVERY

F.O.B relevant Iraqi loading terminal.

(End of Article 3)

ARTICLE 4 – EFFECTIVE DATE AND TERM

This Heads of Agreement shall come into effect from the Effective Date and shall continue in

effect until this Contract terminates or the Buyer and the Seller enter into the Export Oil

Sales Agreement whichever is earlier.

(End of Article 4)

ARTICLE 5 – PRICE



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Export Oil Price shall be determined pursuant to Article 18 of this Contract. The value of the

quantity of Export Oil lifted ("Proceeds") shall be credited to Seller's account, immediately

upon receipt by the Buyer, under this Contract.

(End of Article 5)

ARTICLE 6 – PAYMENT

The Proceeds receivable by the Seller under this Agreement shall be used to reduce the

amounts owed to the Buyer by the NOC under this Contract and, therefore, no payments to

the Seller are required for such Export Oil deliveries. The Buyer shall not be required to pay

the Seller nor post letters of credit or other guarantees of payment, relative to such

deliveries, except for deliveries in excess of amounts owed to the Buyer under this Contract.

(End of Article 6)

ARTICLE 7 – EXPORT OIL SALES AGREEMENT

Contractor and SOMO shall in due time enter into the Export Oil Sales Agreement which

shall embody the principles set out in this Heads of Agreement and it may include such other

provisions as customarily used by international petroleum industry and shall continue in

effect for the Term of this Contract. Pending the execution of the Export Oil Sales

Agreement, the provisions of this Heads of Agreement shall apply.

(End of Article 7)

GENERAL TERMS AND CONDITIONS (PART 2)

All other terms and conditions in Seller's General Terms and Conditions for Export Oil

Sale/Purchase Contracts ("GTC") apply, except as amended in the special conditions hereabove.

Any provisions in Seller’s GTC which allow the Seller to suspend or terminate all or part of

this Heads of Agreement or the subsequent Export Oil Sales Agreement shall act only to

cancel affected lifting which will be rescheduled by mutual agreement. The arbitration

provisions of this Contract shall apply mutatis mutandis.



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Model Gas Service Development and Production Contract (“GSDPC”) April 23, 2009



Attachment A to Addendum Four- Export Oil Lifting and Reporting

Export Oil Lifting and Reporting

(Assuming first lifting in January )

Quarter

preceding

First

Lifting

Quarter



Oct.

Nov.

Dec.

Jan.



First Lifting

Quarter



Feb.

Mar.

Apr.



Second

Lifting

Quarter



May

June

July



Third Lifting

Quarter



Aug.

Sep.

Oct.



Fourth

Lifting

Quarter



Nov.

Dec.



Quarterly Service Fees and Supplementary Fees

Reports agreed (for next Quarter)

Forward Quantity Statement for First Lifting Quarter

(Price = October price)

January crude nomination (acceptance of all Month

nominations by 20th)

February crude nomination

Quarterly Service Fees and Supplementary Fees

Report agreed

Forward Quantity Statement, for Second Lifting Quarter

(Price=January price)

March crude nomination

April crude nomination

May crude nomination

Lifting Statement and Quarterly Service Fees and

Supplementary Fees Report agreed (Adjustment made

for First Quarter actuals)

Forward Quantity Statement (For Third Quarter)

(Price = April price)

June crude nomination

July crude nomination

August crude nomination

Lifting Statement and Quarterly Service Fees and

Supplementary Fees Report agreed (Adjustment made

for Second Quarter actuals)

Forward Quantity Statement ( For Fourth Quarter)

(Price = July price)

September crude nomination

October crude nomination

November crude nomination

Lifting Statement and Quarterly Service Fees and

Supplementary Fees Report agreed

(Adjustment made for Third Quarter actuals)

Forward Quantity Statement ( For next Quarter)

(Price = October price)

December crude nomination

January crude nomination

(End of Addendum Four)



84



No

Later

Than

15th

1st

10th

10th

15th

1st

10th

10th

10th

15th

1st

10th

10th

10th

15th

1st

10th

10th

10th

15th

1st

10th

10th