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Perenco Belize Limited



TABLE OF CONTENTS



Article



Definitions

II



Grant of Rights to the Contractor



III



Term



IV



Relinquishment



V



General Obligations of the Contractor



VI



Minimum Work and Expenditure Obligations



VII



Obligations of the Government



VIII



Royalty/Production Payment



IX



Recovery of Petroleum Operations Expenditures; Production Sharing



X



Valuation and Measurement of Petroleum



XI



Marketing, Royalty in Kind and Domestic Requirements



XII



Payment Procedure



XIII



Surface Rentals



XIV



Natural Gas



XV



Taxes



XVI



Exemptions from Custom Duties



XVII



Exchange and Currency Controls



XVIII



Title to Equipment



XIX



Government Participation



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XX



Training and Employment



XXI



Purchases in Belize



XXII



Unitization



XXIII



Danger to Persons, Property or Environment



XXIV



Arbitration



XXV



Termination



XXVI



Books. Accounts and Audits, Records, Reports and Inspections



XXVII



Insurance and Indemnification



XXVIII



Assignment



XXIX



Law of the Agreement



XXX



Force Majeure



XXXI



Entire Agreement and Amendments



XXXII



Waiver



XXXII'



Confidentially



XXXIV



Notices



Exhibit A



Description of contract area



Exhibit B



Map of contract area



Exhibit C



Bank Guarantee



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Perenco Belize Limited



PRODUCTION SHARING AGREEMENT



THIS AGREEMENT, made and entered into this 29th day of January, 2008, by and

between the GOVERNMENT OF BELIZE, (hereinafter referred to as "the Government")

acting through the Minister of Natural Resources and the Environment and Perenco

Belize Limited a corporation duly organized and existing under the laws of the Cayman

Islands with business address at 1440 Coney Drive, P.O. Box 63, Belize City, Belize

(hereinafter referred to as "the Contractor").

WHEREAS, the entire property in, and control over all petroleum resources in or

under the territory of Belize is vested in the Government on behalf of Belize,

WHEREAS, no petroleum operations shall be conducted in Belize by any person

other than the Government unless such person has entered into a contract in

accordance with the Petroleum Act (No.8 of 1991),

WHEREAS, the Government wishes to promote the exploration for and

production of the petroleum resources in and throughout the contract area, and the

Contractor desires to join and assist the Government in accelerating the exploration for

and production of the petroleum resources within the contract area,

AND WHEREAS, the Contractor represents that it has the financial resources,

technical competence and professional skills necessary to carry out the petroleum

operations hereinafter described.



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



ARTICLE I



Definitions

1.1

In this Agreement, the following terms, regardless of whether they are written in

capital letters or otherwise, shall have the following meanings:



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1.1.1 "affiliated company" shall mean any entity directly or indirectly effectively

controlling, or effectively controlled by, or under direct or indirect effective

common control of, a specified entity. For the purposes of this definition,

"control", when used with respect to any specified entity, means the power to

direct, administer and dictate policies of such entity (it being understood and

agreed that it is not necessary to own directly or indirectly fifty percent (50%) or

more of such entity's voting securities to have effective control over such entity,

but ownership, direct or indirect, of fifty percent (50%) or more of such entity's

voting securities shall automatically indicate effective control), and the terms

"controlling" and "controlled" have meanings corresponding to the foregoing;



1.1.2 "appraisal well" shall mean a well drilled within the contract area, following a

discovery, for the purpose of delineating the petroleum reservoir(s) to which the

discovery relates in terms of thickness and lateral extent and estimating the

quantity of recoverable petroleum therein;

1.1.3 "barrel" shall mean a quantity or unit of crude oil equal to 158.9874 liters (forty­

two (42) United States gallons) at a temperature of sixty (60) degrees Fahrenheit

(15.56 degrees Centigrade) under one atmosphere of pressure;

1.1.4 "calendar year" shall mean a period of twelve (12) consecutive months, according

to the Gregorian Calendar, starting with the 1st of January and ending with the

31 5t of December;

1.1.5 "calendar month" or "month" shall mean any of the twelve (12) months of the

calendar year;

1.1.6 "commercial discovery" means a discovery of petroleum which can be exploited

commercially in accordance with accepted practices in the international

petroleum industry;

1.1.7 "continental shelf' shall mean the part of the seabed and subsoil of the

submarine areas adjacent to the coast of Belize, but outside the territorial waters,

over which Belize is entitled by international law to exercise sovereign rights for

the purposes of exploring and exploiting its natural resources;



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1.1.8 "contract area" means the geographical area described in Exhibits A and B which

is covered by this Agreement; and includes the whole of, or such part or parts of,

the original area awarded to a Contractor which shall remain at the disposal of

such Contractor from time to time pursuant to the terms of this Agreement;

1.1.9 "contract year" shall mean a period of twelve (12) consecutive calendar months,

counted from the first day of the first calendar month following the effective date

of this Agreement or from the anniversary of such first day of such month;

1.1.10 "crude oil" shall mean petroleum which is in liquid state at the well head or gas/oil

separator or which is extracted from natural gas, including distillate and

condensate;

1.1.11 "day" shall mean a calendar day unless otherwise provided herein;

1.1.12 "delivery point" shall mean the FOB point of export in Belize or such other point

which may be agreed between the Government and the Contractor;

1.1.13 "development and production operations" means operations for or in connection

with the production of petroleum;

1.1.14 "development and production period" shall mean the period referred to in

paragraph 3.4;

1.1.15 "discovery" in relation to petroleum, shall mean petroleum not previously known

to have existed, recovered at the surface in a flow measurable by conventional

petroleum industry testing methods;

1.1.16 "effective date" shall mean the date first above written;

1.1.17 "exploration expenditures" shall mean expenditures made in conducting

exploration operations hereunder, but excluding expenditures made within the

area of a field after a commercial discovery has been declared. Exploration

expenditures shall be determined in accordance with the Income and Business

Tax Act (as amended and in effect from time to time);



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1.1.18 "exploration operations" means operations for or in connection with exploration

for petroleum;

1.1.19 "exploration period" shall mean the period referred to in paragraph 3.1;

1.1.20 "exploration well" shall mean a well other than an appraisal well drilled in the

course of exploration operations;

1.1.21 "field" shall mean an area, as designated by agreement between the Government

and the Contractor, where a commercial discovery of crude oil or natural gas has

been declared;

1.1.22 "gross revenues" shall mean the sum of all proceeds of sales and the monetary

equivalent of the value of other dispositions of petroleum produced and saved

and not used in petroleum operations and any other proceeds derived from

petroleum operations;

1.1.23 "income tax" shall mean that tax imposed on net income pursuant to the Income

and Business Tax Act (as amended and in effect from time to time);

1.1.24 "initial commercial production" shall mean the date on which the first regular

shipment of crude oil or natural gas, or both, is made from a field under a

program of regular production and sale;

1.1.25 "Inspector" shall mean the Inspector of Petroleum appointed under section 4 of

the Petroleum Act (8 of 1991);

1.1.26 "maximum efficient rate" shall mean the maximum rate of production of crude oil

in a field, without excessive rate of decline of production or excessive loss of

reservoir pressure, and in accordance with generally accepted practices in the

international petroleum industry and the provisions of paragraph 6.3;

1.1.27 "Minister" shall mean the Minister responsible for petroleum affairs in the

Government of Belize;



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1.1.28 "natural gas" shall mean all petroleum which at atmospheric conditions of

temperature and pressure is in a gaseous state, and includes wet mineral gas,

dry mineral gas, wet gas and residue gas remaining after the extraction,

processing or separation of liquid petroleum from wet gas, as well as non­

petroleum gas or gases produced in assoclation with liquid or gaseous

petroleum;

1.1.29 "net petroleum" shall mean the value of the total quantity of petroleum produced

and saved in a given calendar year and not used in petroleum operations after

deduction of the value of the royalties made in such calendar year and after

recovery of petroleum operations expenditures pursuant to paragraph 9.1;

1.1.30 "net taxable income" shall mean net taxable income as determined in accordance

with the provisions of the Income and Business Tax Act (as amended and in

effect from time to time);

1.1.31 "petroleum" means all natural organic substances composed of carbon and

hydrogen; and includes crude oil and naturc;l gas, and all other mineral

substances, products, by-products and derivatives that are found in conjunction

with petroleum;

1.1.32 "Petroleum Act" shall mean the Petroleum Act (8 of 1991) and any subsidiary

legislation made thereunder;

1.1.33 "petroleum operations" means the operations related to the exploration,

development, extraction, production, field separation, transportation, storage,

sale or disposal of petroleum; but does not include any transportation or other

operations (i) beyond the point of export; or (ii) in the case of petroleum which is

processed within Belize, beyond the point of entry into a refinery or liquefaction or

natural gas treatment plant;

1.1.34 "petroleum operations expenditures" shall mean expenditures incurred in

conducting petroleum operations hereunder, determined in accordance with the

Income and Business Tax Act (as amended and in effect from time to time);

1.1.35 "royalty" shall mean the royalty or production payment described in Article VIII;



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1.1.36 "quarter" shall mean a period of three (3) consecutive months commencing with

the first day of January, April, July and October, respectively, of each calendar

year;

1.1.37 "well" means any opening in the ground made or being made by drilling or boring,

or in any other manner, in connection with exploration operations or development

and production operations, other than a seismic hole;

1.1.38 "work programme" shall mean an itemized statement of the petroleum operations

to be carried out in the contract area in each calendar year, or to be carried out

for specific activities such as drilling of exploration wells and appraisal wells and

development programmes, all in a form acceptable to the Government;

1.1.39 "work programme budget" shall mean the estimate of the costs of all items

included in the corresponding work programme, including both capital and

operating budgets, all in a form acceptable to the Government.



ARTICLE II

Grant of Rights to the Contractor



2.1



The Government grants to the Contractor, subject to the terms and conditions set

forth in this Agreement, the exclusive right to conduct petroleum operations within

the contract area for the term of this Agreement. Except as provided in

paragraph 11.3, the Contractor shall have the right, during the term of this

Agreement, to freely lift, dispose of and export its share of the petroleum

produced hereunder.



2.2



Title to petroleum to which the Contractor is entitled hereunder shall pass to the

Contractor at the delivery point. Any loss of petroleum that may occur between

the wellhead and the delivery point shall be borne by the Contractor solely to the

extent any such loss is the direct result of the Contractor's gross negligence.



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2.3



The Contractor shall, except as expressly otherwise provided in this Agreement,

conduct all petroleum operations hereunder at its sole risk, cost and expense.

The Contractor shall look only to the petroleum to which it is entitled under this

Agreement to recover petroleum expenditures, and such petroleum shall be the

Contractor's sole source of compensation thereunder.



2.4



The Contractor shall be responsible to the Government for the execution of all

petroleum operations in accordance with the provisions of this Agreement.

Without prejudice to the Contractor's position as an independent contractor

hereunder, the extent and character of such work to be done by the Contractor

shall be subject to the general supervision, review and approval of the

Government to which the Contractor shall report and be responsible as herein set

forth.

.



2.5



The Contractor is authorized to construct all facilities as may be necessary for

petroleum operations during the term of this Agreement such as pipelines,

bridges, ferries, landing fields, radio, telephone and related communication

systems but subject to the laws in force in Belize from time to time for the

regulation and control of such facilities and their construction.



2.6



The Government reserves the right to grant licenses to others to prospect for,

explore for and mine minerals other than petroleum within the contract area, and

further reserves to itself the right to so prospect, explore and mine directly, all

subject to the provisions of paragraph 5.3.



2.7



Recognizing the right of the Government to amend the legislation and

regulations, including taxation legislation, applicable to the conduct of petroleum

operations in Belize at any time, if any material changes are made by the

Government to such legislation or regulations, including taxation legislation, or

new legislation or regulations are passed, after the effective date which

significantly affect the economic interest of the parties under this Agreement to

the detriment of the Contractor, but excluding any change in taxation which

applies generally to petroleum contractors and the effect of which is reasonably

equitable for both parties, the Contractor may, upon notifying the Government of

the effect of such material changes, request to meet with the Government to

discuss a resolution. The Government shall grant the Contractor such a meeting

and the parties shall seek to resolve the matter by consultations and negotiations

and shall propose to the other modifications to this Agreement which restore the



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economic interest of this Agreement to the Contractor and which are acceptable

to both parties. If the Government or Contractor does not propose modifications

to this Agreement which are acceptable to the other within one hundred and

eighty (180) days from the aforesaid notice, the dispute may be referred to

arbitration, pursuant to paragraph 24.2 of this Agreement, to determine what, if

any, action is required to restore such economic interest of this Agreement to the

Contractor.



ARTICLE '"



Term



3.1



The Contractor is authorized to conduct exploration operations during an

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

two (2) contract years ("Initial Exploration Period"), and (ii) subject to the

conditions hereinafter provided, three (3) successive renewal periods ("First

Renewal Period", "Second Renewal Period" and 'Third Renewal Period") of two

(2) years each to the initial exploration period. Such renewal periods shall be

granted to the Contractor upon the Contractor's request delivered to the

Government in writing not later than ninety (90) days prior to the expiration of the

then current period, subject to the Contractor having materially fulfilled its

obligations hereunder for the then current period, including the relinqUishment

provisions of Article IV, and having submitted with such application a work

programme and work programme budget for the period of renewal which is

consistent with the undertakings set forth in paragraph 6.1.



3.2



If at the end of the exploration period, no commercial discovery has been made

in any part of the contract area, this Agreement shall automatically terminate in its

entirety, provided, however, that the Government undertakes to grant an

extension for such period, and for such area as may be necessary, in the opinion

of the Government and the Contractor, (i) for the Contractor to complete the

drilling, testing, appraisal or plugging of any well actually being drilled, tested,

appraised or plugged at the end of the exploration period and (ii) for the

Government and the Contractor to determine that a discovery resulting from such

a well is a commercial discovery pursuant to paragraphs under 6.2.



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3.3



If a commercial discovery is made in any pOltion of the contract area during the

exploration period, the Contractor will commence development and production

operations in that particular portion of the contract area.



3.4



In the event of a commercial discovery, the extent of the area capable of

production of petroleum from the formation or formations so identified shall be

determined in accordance with the provisions of the paragraphs under 6.2 or

Article XIV. The area so determined shall thereupon be converted automatically

into a field, with effect from the date of the declaration of the commercial

discovery. The term of the development and production period for each field

shall extend for twenty-five (25) contract years from the first day of the calendar

year commencing after the date of the declaration of the commercial discovery in

said field. In the event of a new commercial discovery as a result of new

exploratory drilling in formations that underlie and overlie each other in an

existing field, such formations shall constitute a single field and the field shall be

redefined as necessary to incorporate all underlying and overlying formations, the

term of the development and underlying and overlying formations, and the term

of the development and production period for such redefined field shall extend for

twenty-five (25) contract years from the first day of the first calendar year

commencing after the date of the declaration of the latest commercial discovery

therein.



ARTICLE IV

Relinquishment



4.1



On or before the end of the initial exploration period, the Contractor shall

relinquish twenty-five percent (25%) of the original contract area.



4.1.1 On or before the end of the first renewal period the Contractor shall relinquish an

additional twenty-five percent (25%) of the original contract area.

4.1.2 On or before the end of the second renewal period the Contractor shall relinquish

an additional twenty-five percent (25%) of the original contract area.



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4.2



At the end of the exploration period, the Contractor shall relinquish the remainder

of the original contract area not then converted to a field.



4.3



The size and shape of the portion or portions to be relinquished shall be

determined by the Contractor, provided however, that (a) the Contractor shall

advise the Government at least ninety (90) days in advance of the date of

relinquishment of the description and area of the portion or portions to be

relinquished, (b) the Contractor shall consult with the Government regarding the

shape and size of each individual portion of the areas being relinquished, (c) the

area being relinquished shall not be divided into more than two portions, each of

which shall be comprised of, and be defined by reference to, blocks as described

in Exhibit B, save where no such area or areas can be identified for

relinquishment in accordance with this paragraph without including in such area

or areas in whole or in part a field or area in which a discovery has been made

which the Contractor is not otherwise required to relinquish hereunder, and (d)

each such relinquished individual portion shall be not less than twenty percent

(20%) of the area being relinquished at such time with sides parallel to the

boundaries of the original contract area, to the extent that the boundaries of the

original contract area permit, and with the longest side not more than three times

as long as the shortest side, and shall in any event be of sufficient size and

convenient shape to enable petroleum operations to be conducted thereon or

thereunder.



4.4



The Contractor shall not be obliged to relinquish, pursuant to paragraphs 4.1 and

4.2, any part of the original contract area which has been converted to a field or

in which a discovery has been made which the Contractor is not otherwise

required to relinquish hereunder.



4.5



Upon at least ninety (90) days written notice to the Government prior to the end

of any contract year, the Contractor shall have the right to relinquish all or any

portion of the contract area effective as of the end of such contract year, subject

to the provisions of paragraph 4.4, and such portion shall then be credited

against that portion of the contract area which the Contractor is next required to

relinquish pursuant to the provisions of paragraphs 4.1 and 4.2.



4.6



No relinquishment made in accordance with this Article IV shall relieve the

Contractor of: (a) its obligations to make payments due as a result of surface

rentals prior to the effective date of any such relinquishment, or (b) the minimum

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work and expenditure commitments undertaken pursuant to paragraphs 6.1.1

and 6.1.2.

4.7



Upon relinquishment of any area, the Contractor shall perform all necessary

clean-up activities in accordance with generally accepted practices in the

international petroleum industry, and shall take all other action necessary to

prevent hazards to human life or third party property.



ARTICLE V

General Obligations of the Contractor



5.1



The Contractor shall be responsible for conducting all petroleum operations

within the contract area diligently, expeditiously and efficiently in accordance with

generally accepted practices in the international petroleum industry and pursuant

to work programmes approved in accordance with paragraph 5.4.

The

Contractor shall ensure that all eqUipment, materials, supplies, plant and

installations used by itself, and its contractors and subcontractors comply with

generally accepted standards in the international petroleum industry and are of

proper construction and kept in good working order.



5.2



Except as othelWise provided in this Agreement,the Contractor shall:

(a)

advance all necessary funds and purchase or lease all eqUipment,

materials and supplies required to be purchased or leased in connection

with petroleum operations;

(b)

furnish all the technical expertise and assistance, including foreign

personnel, required for the conduct of petroleum operations;furnish all

other funds for the performance of petroleum operations as may be

required, including payment to foreign entities that perform services as

contractors or subcontractors to the Contractor;

(c)

appoint a representative and in his

therefore, with respect to this Agreement, who

resident in Belize and who shall have full

Contractor for all purposes of this Agreement



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absence, a replacement

shall have an office and be

authority to represent the

and whose name shall, on



Perenco Belize Limited



appointment within ninety (90) days after the effective date, be made

known to the Government;

(d)

provide acceptable working conditions and living accommodations,

and access to medical attention and nursing care, for all personnel

employed by it, its contractors and subcontractors in petroleum operations;

and

(e)

5.3



pay social security for all employees as per the Laws of Belize.



If, after the effective date, others are granted licenses within the contract area

authorizing prospecting for, exploration for or mining of any minerals or other

substances other than petroleum, or the Government proceeds with such

prospecting, exploration or mining directly in its own behalf, the Contractor shall

use its best efforts to avoid obstruction or interference with such licensee's or

Government's operations within the contract area. The Government shall use its

best efforts to ensure that operations of third parties do not obstruct the

Contractor's petroleum operations within the contract area.



5.4.1 At least ninety (90) days prior to the beginning of each calendar year, or at such

other time as is mutually agreed by the parties, the Contractor shall prepare and

submit for approval to the Government an annual work programme and work

programme budget of petroleum operations and petroleum operations

expenditures by quarters for the contract area setting forth the petroleum

operations the Contractor proposes to carry out during the ensuing calendar

year. Such annual work programmes and work programme buqgets shall comply

with the minimum work and expenditure obligations described in paragraphs 6.1.

Approval by the Government of the proposed annual work programme budget of

petroleum operations and petroleum operation expenditures will not be

unreasonably withheld or delayed. The Government and the Contractor shall

have reached agreement upon an annual work programme and work programme

budget for the period from the effective date until the end of the calendar year in

which the effective date falls or for the ensuing calendar year if the effective date

falls after the 30th day of September.

5.4.2 Should the Government wish to propose revisions to the annual work programme

or work programme budget, it shall within thirty (30) days after receipt thereof so

notify the Contractor specifying in reasonable detail its reasons therefor.

Promptly thereafter the parties shall meet and endeavor to agree on the revisions

proposed by the Government. If the Contractor and the Government fail to agree

upon any revisions proposed by the Government within sixty (60) days of the



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receipt of the Contractor's proposals, the points of disagreement shall be

resolved as follows:

(i)



in the case of changes to an annual work programme and work programme

budget which relate to exploration operations, such changes shall be

implemented to the extent that they are reasonably consistent with the

applicable development work programme and work programme budget

adopted pursuant to paragraph 6.1 or the general objective of such annual

work programme;



(ii)



in the case of changes to an annual work programme and work

programme budget which relate to the development of a field, such

changes shall be implemented to the extent that they are reasonably

consistent with the applicable development work programme and work

programme budget adopted pursuant to paragraph 6.2 or the general

objective of such annual work programme;



(iii)



all other aspects of the annual work programme and work programme

budget to which the Government proposes revisions shall be mutually

agreed before such aspects of the annual work programme and work

programme budget shall be adopted.



5.4.3 It is recognized by the parties that the details of an annual work programme may

require changes in light of then existing circumstances. In such event, the

Contractor may introduce such changes as may be necessary, following

consultation with the Government, but subject to the following:

(i)



in the case of changes to an annual work programme and work programme

budget which relate to exploration operations, such changes may be

implemented to the extent that they are not inconsistent with the

undertakings set forth in paragraph 6.1 or the general objective of such

annual work programme;



(ii)



in the case of changes to an annual work programme and work programme

budget which relate to the development of a field, such changes may be

implemented to the extent that they are not inconsistent with the applicable

development work programme and work programme bUdget adopted

pursuant to paragraph 6.2 or the general objective of such annual work

programme;



(iii)



all other changes may be notified in writing to the Government and shall be

mutually agreed before they may be implemented.



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5.4.4 To the maximum extent practicable, the Contractor shall involve representatives

of the Government in the preparation of the annual work programme and work

programme budget.



5.4.5 Within thirty (30) days after the end of each quarter, the Contractor shall submit

to the Government a report describing and summarizing petroleum operations

carried out, and petroleum operations expenditures incurred during such quarter.

Such report shall be in a form acceptable to the Government.



5.5.1 The Contractor shall:

(i)



carry out decommissioning at the end of field life unless the Government

expressly releases it from the obligation;



(ii)



at the time of seeking approval to develop a petroleum field, include

decommissioning proposals as part of its development plan submitted to

the Government;



(iii)



on commencement of production operations, and by such date and in

such manner as may be prescribed by law, establish a decommissioning

fund into which the Contractor shall contribute funds to complete

decommissioning in accordance with the approved decommissioning plan.



5.5.2 Any shortfall in the decommissioning fund to meet the costs of decommissioning

shall not release the Contractor from the obligation to complete decommissioning

at the end of the field life in accordance with the approved decommissioning plan.



5.5.3 For purposes of this paragraph, "decommissioning" means the measures to be

taken by the Contractor at the cessation of petroleum operations to remove or

otherwise deal with installations, eqUipment, pipelines and other facilities whether

on or off shore, erected or used in connection with the exploration for and

production of petroleum and to rehabilitate land disturbed by the operations.



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ARTICLE VI

Minimum Work and Expenditure Obligations



Exploration Period



6.1



The Contractor shall commence petroleum operations hereunder not later than

ninety (90) days after the effective date.



6.1.1 The amount to be expended by the Contractor in conducting exploration

operations in accordance with approved work programmes during the exploration

period shall not be less than the following as adjusted pursuant to paragraph

6.1.3.



6.1.1.1 Initial Exploration Period:

(a)



First contract year US$50,000.



(b)



Second contract year US$150,000.



6.1.1.2 First Renewal Period (if requested by the Contractor pursuant to paragraph 3.1):

(a)



First contract year US$1 ,200,000.



(b)



Second contract year US$300,000.



6.1.1.3 Second Renewal Period (if requested by the Contractor pursuant to paragraph

3.1 ):

(a)



First contract year US$3,000,000.



(b)



Second contract year US$150,000.



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6.1.1.4 Third Renewal Period (if requested by the Contractor pursuant to paragraph

3.1 ):

(a)



First contract year US$3,OOO,OOO.



(b)



Second contract year US$50,OOO.



6.1.2 The Contractor undertakes to carry out and comply with the following minimum

work commitments.

6.1.2.1 Initial Exploration Period:

(a)



First contract year:

Geologic studies, seismic reprocessing and interpretation, plan aeromagnetic

survey.



(b)



Second contract year:

Acquire, process and interpret aeromagnetic survey.



6.1.2.2 First Renewal Period (if requested by the Contractor pursuant to paragraph 3.1):

Acquire 150km 2D seismic.



Process and interpret 2D seismic. Plan exploration well.



6.1.2.3 Second Renewal Period (if requested by the Contractor pursuant to paragraph

3.1 ):

Drill one exploration well.



Evaluate results of first exploration well. Plan second exploration well.



6.1.2.4 Third Renewal Period (if requested by the Contractor pursuant to paragraph

3.1 ):

Drill one exploration well.



Evaluate results of second exploration well.





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6.1.3 If, during any contract year in the exploration period, the Contractor should

expend more than the required minimum annual exploration expenditures, the

Contractor may subtract an amount equal to the excess amount spent from the

required minimum exploration expenditures for the ensuing contract year in the

exploration period. If works carried out in any contract year exceed the minimum

work commitment relating to such contract year as provided in paragraph 6.1.2,

the excesses may, with the Government's prior written consent, count towards

the satisfaction of the minimum work commitments for the ensuing contract year.

Compliance with the required minimum exploration expenditures for a given

contract year shall not relieve the Contractor of its obligation to comply with the

required minimum work commitment, nor shall compliance with the required

minimum work commitment for a given contract year relieve the Contractor of its

obligation to comply with the required minimum exploration expenditures for such

contract year.

6.1.4

(a) Within ninety (90) days of the effective date and, where this Agreement has

been extended pursuant to paragraph 3.1, on the first day of each extension

period, the Contractor shall provide security by means of a bank guarantee,

in a form set forth in Exhibit C, equal to the total unadjusted minimum

exploration expenditures for the initial exploration period, or, as the case may

be, for the first, second and third renewal periods, as set forth in paragraph

6.1.1. Upon prior confirmation by independent accountants acceptable to

both the Contractor and the Government of the exploration expenditures

actually incurred, such security shall be reduced at the end of each contract

year in the exploration period to the extent that the Contractor has spent the

prescribed minimum amounts stipulated in paragraph 6.1.1, provided that the

outstanding balance shall not be less than the required minimum exploration

expenditures for the remaining contract year of the exploration period in

question, as stipulated in paragraph 6.1.1 and as adjusted pursuant to

paragraph 6.1.3.

(b) If, at the expiration of the exploration period, or upon the date of termination

of this Agreement, or upon relinquishment of the entire contract area by the

Contractor pursuant to paragraph 4.6, whichever first occurs, the Contractor

has not expended for exploration operations sums at least equal to the total

minimum exploration expenditures, as adjusted, required hereunder, the

balance of the security corresponding to the unexpended minimum

exploration expenditures, as adjusted, automatically shall be paid to the

Government.



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(c) If, at the end of any contract year in the exploration period, the Contractor

has not expended for exploration operations sums at least equal to the

minimum exploration expenditures, as adjusted, required hereunder for such

contract year, a portion of the security corresponding to the unexpended

minimum exploration expenditures, as adjusted, for such contract year

automatically shall be paid to the Government.



Discovery and Development Period



6.2



The terms and conditions relating to the discovery and development period shall

be as follows.



6.2.1 When in the course of petroleum operations, a discovery of petroleum is made,

the Contractor shall immediately notify the Government in writing accordingly,

specifying in such notice all pertinent information concerning the discovery.

6.2.2 If the Contractor determines to conduct a drill--stem or production test, in open

hole or through perforated casing, with regard to the discovery, it shall notify the

Government of the time of such test at least twenty-four (24) hours prior to the

proposed test, and the Government shall have the right to have a representative

present during such test. Not later than ninety (90) days after completion of such

test or tests, the Contractor shall complete the analysis and interpretation of the

data resulting from such test and submit a report to the Government which shall

contain copies of such data and its analysis and interpretation thereof, and which

shall also contain a written notification of whether or not, in the Contractor's

opinion, such discovery is of potential commercial interest. If the Contractor

plugs and abandons the well which encountered such discovery without

conducting a drill stem or production test, or fails to conduct a drill stem or

production test with respect to such discovery within one hundred and eighty

(180) days from the date on which such discovery has been made, it shall be

deemed to have notified the Government that, in the Contractor's opinion, such

discovery is not of potential commercial interest.

6.2.3 If, pursuant to paragraph 6.2.2, the Contractor notifies, or is deemed to have

notified, the Government that such discovery is not of potential commercial

interest, the Government shall have the option, exercisable by notice in writing to

the Contractor, to require the Contractor to relinquish the area corresponding to

such discovery and forfeit any rights relating to such discovery and any

production therefrom. The area subject to relinquishment shall not exceed the

prospective producing area determined by taking into account the area of the



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structural closure of the prospective horizon and other relevant technical factors.

Any such relinquishment by the Contractor of the area relating to such discovery

before the end of the exploration period shall be carried out in accordance with

paragraphs 4.4,4.6 and 4.7.

6.2.4 If, pursuant to paragraph 6.2.2, the Contractor notifies the Government that the

discovery is of potential commercial interest, the Contractor shall promptly

prepare and submit for approval to the Government a work programme and work

programme budget for the appraisal of such discovery. Such appraisal work

programme and work programme budget shall include a complete programme of

appraisal operations necessary to determine whether such discovery is a

commercial discovery.

6.2.5 Within fifteen (15) days after the submission of the appraisal work programme

and work programme budget pursuant to paragraph 6.2.4, the Contractor and the

Government shall meet with a view to adopting such work programme and work

programme budget or mutually agreeing upon amendments or additions thereto.

Failing agreement between the Contractor and the Government as to such work

programme and work programme budget at such meeting, or within fifteen (15)

days thereafter, the original appraisal work programme and work programme

budget submitted by the Contractor, revised in accordance with any agreed

amendments or additions thereto, shall be deemed adopted, and the Contractor

shall immediately commence implementation thereof. On adoption of the

appraisal work programme and work programme budget, the annual work

programme and work programme budget adopted pursuant to paragraph 5.6

shall be revised accordingly.

6.2.6 If, pursuant to paragraph 6.2.2, the Contractor has notified the Government that

the discovery is of potential commercial interest, it shall, unless otherwise agreed:

(a) in respect of a discovery of crude oil, advise the Government by notice in

writing, whether or not in its opinion, the discovery is commercial within a

period of eighteen (18) months from the date on which the Contractor notified

the Government that said discovery was of potential commercial interest:

Provided that in respect of a discovery of crude oil in water depths of more

than 600 feet, such period may be increased by mutual agreement from

eighteen (18) months to twenty-four (24) months.

(b) in respect of a discovery of non-associated natural gas, advise the

Government by notice in writing, whether or not in its opinion, the discovery is

commercial, within such period as may be stipulated in an Agreement made

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pursuant to Article XIV with respect to such discovery or, in the absence of

such Agreement, within thirty-six (36) months from the date on which the

Contractor notified the Government that said discovery was of potential

commercial interest.

6.2.7 If the Contractor notifies the Government that the discovery is not commercial, or

fails to notify the Government that the discovery is commercial within the periods

prescribed in paragraphs 6.2.6 (a) and (b), the Government shall have the option,

exercisable by notice in writing to the Contractor, to require the Contractor to

relinquish the area corresponding to such discovery and forfeit any rights relating

to such discovery and any production therefrom. The area subject to

relinquishment shall not exceed the prospective producing area determined by

taking into account the area of structural closure of the prospective horizon and

other relevant technical factors. Any such relinquishment by the Contractor of the

area relating to such discovery before the end of the exploration period shall be

carried out in accordance with paragraphs 4.4, 4.6 and 4.7.

6.2.8

(a) The notice submitted to the Government by the Contractor pursuant to

paragraph 6.2.6 (a) and (b) shall be accompanied by a report on the

discovery setting forth all relevant technical and economic data, including, but

not limited to, geological and geophysical information, areas, thicknesses and

extent of the productive strata, petrophysical properties of the reservoir

formations, PVT data, the reservoir's productivity indices for the wells tested

at various rates of flow, permeability and porosity of the reservoir formations,

the relevant characteristics and qualities of the petroleum discovered,

additional geological data and evaluations of the reservoir, crude oil and

natural gas reserves estimates and any other relevant characteristics and

properties of the reservoirs and fluids contained therein, as well as all

evaluations, interpretations and analyses of such data and feasibility studies

relating to the discovery prepared by the Contractor, its contractors,

subcontractors and affiliated companies.

(b) In addition, if the Contractor believes that the discovery is commercial, he

shall submit to the Government with the report described in paragraph 6.2.8

(a) a work programme and work programme budget for the development of

such discovery. Such development work programme and work programme

budget shall set out detailed proposals, including cost estimates, drilling

schedules, number of wells and well spacing, production forecasts and a

timing schedule, in accordance with generally accepted engineering practices

and economics of the international petroleum industry, for the establishment

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and operation of all the facilities, installations and services required for the

production, processing, storage and transportation of petroleum from the

area in which the discovery is located and any other activities incidental

thereto. Proposals relating to production procedures shall ensure that the

area does not suffer an excessive rate of decline of production or an

excessive loss of reservoir pressure. Such development work programme

and work programme budget shall also contain particulars of feasible

alternatives, if any, considered by the Contractor for the development and

exploitation of the discovery and economic feasibility studies carried out by or

for the Contractor with respect to the discovery taking into account the

location, meteorological conditions, cost estimates, the price of petroleum

and any other relevant data and evaluations thereof. The development work

programme and work programme budget shall also be accompanied by an

environmental impact assessment study as provided under Article 23.

6.2.9 The Government shall examine the report and any work programme and work

programme budget submitted pursuant to paragraph 6.2.8 and may require the

Contractor to provide, within a specified period of time, such additional

information and data as it may reasonably require to evaluate such report, work

programme and work programme budget. As soon as possible after the

submission of the report and any work programme and work programme budget

pursuant to paragraph 6.2.8 or receipt of such additional information and data,

the Government and the Contractor shall meet (i) to determine at such meeting,

or at such later date as may be mutually agreed, the boundaries of the area to be

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

budget for the development of the discovery.

6.2.10

(a) At the meeting described in paragraph 6.2.9, the Contractor shall carefully

consider and take into account the proposals of the Government and the

reasons therefor and shall attempt in good faith to reach an agreement with

the Government on the points at issue paying particular consideration to the

objective of achieving initial commercial production expeditiously taking into

account generally accepted engineering practices and economics of the

international petroleum industry.

(b) If the Government and the Contractor agree upon the boundaries of the area

to be delineated as a field and upon the adoption of a work programme and

work programme budget for the development of the discovery, the date upon

which such agreement is reached, as reflected in writing signed by both

parties, shall be the date of the declaration of the commercial discovery for all



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purposes of this Contract. The area so determined shall, on such date, be

automatically converted into a field, and the Contractor shall, as soon as is

practicable, commence development and production operations in the field

according to the adopted work programme and work programme budget.

Upon adoption of the development work programme and work programme

budget, the annual work programme and work programme budget adopted

pursuant to paragraph 5.4 shall be revised accordingly.

(c) In the event that no agreement is reached between the Government and the

Contractor within one hundred and eighty (180) days from the date of

submission of the report and work programme and work programme budget

pursuant to paragraph 6.2.8 as to (i) matters relating to the adoption of the

work programme and work programme budget for the development of the

discovery or (ii) the boundaries of the area to be delineated as a field, the

Government or the Contractor may refer the matter for determination by a

Sole Expert. The determination by a Sole Expert in accordance with this

paragraph shall be final and the work programme and work programme

budget for the development of the discovery and the boundaries of the area

to be delineated as a field, as the case may be, shall be deemed to have

been adopted and agreed as determined, except that the Contractor may,

within sixty (60) days of receipt of such determination, notify the Government

that the discovery to which such work programme and work programme

budget and area so determined is no longer considered to be commercial. If

the Contractor so notifies the Government, the provisions of paragraph 6.2.7

shall apply. Failing such notification, the date after sixty (60) days of the

receipt of such determination shall be deemed to be the date of the

declaration of the commercial discovery for all purposes of this Contract. The

area so determined shall, on such date, be automatically converted into a

field and the Contractor shall, as soon as is practicable, commence

development and production operations in the field according to the work

programme and work programme budget so adopted. Upon adoption of the

development work programme and work programme budget as aforesaid, the

annual work programme and work programme budget adopted pursuant to

paragraph 5.4 shall be revised accordingly.



For purposes of this Article, "Sole Expert" means a person appointed by

Agreement between the Contractor and the Govsrnment to resolve a difference

referred to in paragraph 6.2.10 (c) of this Contract, and, in the event that there is

failure to agree on the person to be so appointed, a person appointed by the

Secretary-General of the Permanent Court of Arbitration at the request of either

Party, who shall be an independent and impartial person of international standing

with relevant qualifications and experience and shall not, by virtue of nationality,

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personal connection or commercial interests have a conflict between his own

interest and his duty as a sole expert.

6.2.11 Notwithstanding any other provision of this Agreement, in the event that initial

commercial production has not occurred within three (3) years, in the case of a

crude oil discovery on land or in water depths of less than six hundred (600) feet,

or five (5) years, in the case of non-associated natural gas discovery, or such

longer period as the Government may have agreed in the development work

programme and work programme budget, from the date of declaration of

commercial discovery for a field, the ContraGtor shall relinquish the area

comprising such field and shall forfeit any rights relating to such field and any

production therefrom.



Production Period

6.3 The terms and conditions of the production period shall be as set out below.



6.3.1 The Contractor shall produce crude oil from the contract area at a rate below the

maximum efficient rate. In conjunction with the adoption of the development

work programme and work programme budget pursuant to paragraph 6.2.10 the

Contractor and the Government shall establish at that time the maximum efficient

rate of production for crude oil and the production rate for non-associated natural

gas. Such rates shall be reviewed annually at the time of submission of the

annual work programme by the Contractor pursuant to paragraph 5.4 and

revised, if necessary, by mutual agreement. In the case of non-associated natural

gas, the production rate shall not be required by the Government to be less than

that required to satisfy any contracts then in existence for the sale of such natural

gas.

6.3.2 Not less than ninety (90) days prior to the beginning of each calendar year

following initial commercial production, the Contractor shall prepare and furnish

to the Government for approval a forecast statement setting forth by quarters the

total quantity of crude oil (by quality, grade and gravity) and natural gas that the

Contractor estimates can be produced, saved and transported hereunder during

such calendar year in accordance with generally accepted practices in the

international petroleum industry. The Contractor shall endeavor to produce in

each calendar year the forecast quantity. The crude oil shall be run to storage

tanks, constructed, maintained and operated by the Contractor in accordance

with Government Regulations, in which such crude oil shall be metered or

otherwise measured for all purposes required by this Agreement.

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ARTICLE VII

Obligations of the Government



7.1



The Government shall:



7.1.1 assist the Contractor in the execution of work programmes by supplying or

otherwise making available all geological, geophysical, geographical, drilling,

well, production and other information, including well location maps, relating to

the contract area in the possession of the Government or coming into the

possession of the Government;

7.1.2 provide the right of ingress to and egress from the contract area and any facilities

used in petroleum operations, and, upon application in the prescribed manner, all

necessary visas, work permits, import licenses and rights of way and easements

as may be required by the Contractor and its contractors and subcontractors and

which may be available from resources within the Government's control.



ARTICLE VIII

Royalty/Production Payment



8.1



The Contractor shall pay to the Government a royalty equal to (i) ten percent

(10%) of the value of the annual gross production of crude oil produced and

saved in each calendar year and not used or consumed in petroleum operations

and (ii) seven and a half percent (7.5%) of the value of the annual gross

production of natural gas produced, saved and sold in each calendar year and

not used or consumed in the conduct of petroleum operations.



8.2



The royalty with respect to crude oil shall be payable in cash and/or kind at the

option of the Government. The royalty with respect to natural gas shall always

be paid in cash.



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8.3



For the purposes of determining the amount of the royalty due, crude oil and

natural gas shall be valued in accordance with paragraphs 10.1, 10.2 and 14.4,

less such costs as the Government may reasonably allow for handling and

transportation from the wellhead to the delivery point as described in such

paragraphs, and the royalty shall be payable quarterly within thirty (30) days of

the end of each quarter on the basis of crude oil production or natural gas sales

which occur in each such quarter. Payment shall be accompanied by a

certificate from the Contractor setting forth in detail the basis for computation of

the royalty. Such certificate shall be in a form acceptable to the Government.



8.4



If the Government elects to take the Royalty with respect to Crude Oil, or any part

thereof, in kind, it shall notify the Contractor in accordance with the provisions of

paragraph 11.2.



ARTICLE IX

Recovery of Petroleum Operations Expenditures: Production Sharing



9.1



In each calendar year, after discharging its obligation for the royalty payment due

to the Government pursuant to Article VIII, the Contractor shall be entitled to

recover all petroleum operations expenditures incurred hereunder, out of one

hundred percent (100%) of the petroleum produced and saved in such calendar

year and not used in petroleum operations by retaining and disposing of that

amount of petroleum equal in value to the unrecovered petroleum operations

expenditures for that calendar year plus all unrecovered petroleum operations

expenditures from prior calendar years. All such petroleum operations

expenditures shall be recovered without a ceiling in the manner, to the extent

provided for, in the Income and Business Tax Act. For the purpose of determining

the value of the quantity of petroleum to which the Contractor is entitled in each

calendar year pursuant to this paragraph 9.1, the provisions of Article X shall be

applied.



9.2



The remaining quantity of petroleum produced and saved in a given calendar

year and not used in petroleum operations, after deduction of the value of the

royalty payments made in such calendar year and after recovery by the

Contractor of petroleum operations expenditures pursuant to paragraph 9.1, ("Net



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Petroleum") shall be taken and disposed of separately by the Government and

the Contractor in each calendar year in the following proportions:



Government's

Production Share

Percent (%)



Contractor's Production

Share Percent (%)



Daily Average

Production



First 10,000 barrels



10



90



Next 10,000 barrels



15



85



Next 10,000 barrels



20



80



Next 10,000 barrels



25



75



Next 10,000 barrels



30



70



Next 10,000 barrels



35



65



Any volume over first

60,000 barrels



40



60



ARTICLE X



Valuation and Measurement of Petroleum



10.1



Crude oil sold by the Contractor in arm's length commercial transactions shall be

valued at the net realized price on such sales.

For purposes of this paragraph, "net realized price" means the price realized at

the delivery point as calculated by adjusting the price actually received at the

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point of sale with allowable deductions. In calculating the net realized price,

deductions may only be made for (a) transportation costs between the delivery

point and the point of sale, (b) commissions and brokerages, and (c) handling

charges; and the deductions shall be limited to amounts that do not exceed

customary and prevailing rates charged therefor in the international oil industry

between independent parties in arm's length commercial transactions.



10.2 Crude oil sold by the Contractor in sales other than arm's length commercial

transactions shall be valued by reference to world market prices of comparable

crude oils sold in arm's length commercial transactions for export in the major

world petroleum markets, and adjusted for oil quality, location and conditions of

pricing, delivery and payment.

10.3 Natural gas shall be valued in accordance with the provisions of paragraph 14.4.

10.4 Sales in arm's length commercial transactions referred to in this Article shall

mean sales other than barter sales made by the Contractor to purchasers that

are not affiliated companies of the Contractor and with whom (at the time the

same is made) the Contractor has no contractual interest involving directly or

indirectly any joint interest.



10.5 The Contractor shall, prior to initial commercial production in any field, carry out

an assay of the crude oil from such field for its valuation and shall promptly

submit the results of such assay to the Government.

10.6 In the event that petroleum operations involve the segregation of crude oils of

different quality, grade or gravity, and if the parties do not otherwise mutually

agree, any and all provisions of this-Agreement concerning valuation of crude oil

shall separately apply to each segregated crude oil. However, in electing to take

crude oil for internal consumption pursuant to paragraph 11.7 and to take royalty

in kind pursuant to paragraph 11.2, the Government shall have the right to

receive, crude oil of the quality, grade and gravity of its choice.

10.7 The Contractor shall supply, operate and maintain equipment for measuring the

volume and quality of the petroleum produced and saved hereunder, including

gravity, density, temperature and pressure measuring devices and any other

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devices that may be required. All measurement equipment and devices shall,

prior to their installation or usage, be approved by the Inspector of Petroleum.

Such equipment and devices shall at all reasonable times be available for

inspection and testing by the Inspector of Petroleum or other authorized

representatives. Any such inspection or testing shall not interfere with the normal

operation of the facilities involved. The equipment and devices used or installed

pursuant to this paragraph shall not be replaced or altered without the prior

approval of the Government.

10.8 The Contractor shall undertake to measure the volume and quality of the

petroleum produced and saved hereunder, consistent with generally accepted

practices in the international petroleum industry, with the frequency and

according to procedures which shall be approved by the Government.

10.9 The Contractor shall give the Inspector of Petroleum timely notice of its intention

to conduct measuring operations and the Inspector shall have the right to be

present at and supervise, either directly or through authorized representatives,

such operations.

10.10 If it is determined, following an inspection or test carried out by the Government

or its representatives, that the equipment, devices or procedures used for

measurement are inaccurate and exceed the permissible tolerances which shall

be established by agreement between the Government and the Contractor, and

such determination is verified by an independent surveyor acceptable to both

parties, such inaccuracy shall be deemed to have existed for one-half of the

period since the last previous such inspection or test, unless it is proved that such

inaccuracy has been in existence for a longer or shorter period. Appropriate

adjustments covering such period shall be made within thirty (30) days from the

date of such determination.



ARTICLE XI

Marketing, Royalty in Kind and Domestic Requirements



11.1 The Contractor shall be obligated to market all crude oil produced and saved

from the contract area, in accordance with marketing agreements first approved

by the Government, and subject to the provisions hereinafter set forth.

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11.2 If the Government elects to take the royalty payment on crude oil in kind, it shall

so notify the Contractor in writing not less than sixty (60) days prior to the

commencement of each six month semester of each calendar year specifying the

quantity, and designating the grade and quality that it elects to take in kind,

based upon estimates, including those contained in the forecast statement

furnished pursuant to parqgraph 6.3.2. Final adjustments shall be made within

ninety (90) days of the end of each calendar year on the basis of actual

quantities. Such notice shall be effective for the ensuing six month semester of

that calendar year. Failure to give such notice shall be conclusively deemed to

indicate the election by the Government not to take in kind.

11.3 Any sale by the Contractor of any part of the Government's share of crude oil

production shall not be for a term expiring more than six (6) months after the date

of execution of the sales contract without the Government's written consent. If

the Government so consents, the Government shall not exercise its rights to

receive crude oil in kind pursuant to paragraph 11.2.

11.4 Any sale by the Contractor of any part of its share of the crude oil produced and

saved from the contract area shall not be for a term expiring more than twelve

(12) months after the date of execution of the sales contract without the

Government's written consent. If the Government so consents, the Government

shall not exercise its rights under paragraph 11.7 to require the Contractor to

satisfy the internal consumption requirements of Belize from crude oil which is

subject to such contract.



11.5 Crude oil which the Government has elected to take in kind shall be delivered by

the Contractor, free of cost to the Government, at regularly spaced intervals at

the delivery point or to the Government's storage facilities in the field, or both, at

the option of the Government. The Government shall provide at such delivery

points, at its sole expense, all storage, transportation and other facilities

necessary to receive such crude oil, provided, however, that if the Government

requests, the Contractor shall provide adequate storage facilities at such places,

free of charge, at the risk of the Government, for a quantity of the Government's

crude oil not exceeding one hundred thousand (100,000) barrels for each field. If

storage exceeds one hundred thousand (100,000) barrels per field at any time,

the Government shall pay to the Contractor a reasonable storage charge for such

excess.



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11.6 If the Government elects to meet all or part of the requirements of the domestic

market of Belize from crude oil production in Belize, it shall use its share of

production from all crude oil production in Belize to do so. If in any year there is

domestic demand in excess of the Government's share of such production, the

Government may require the Contractor to sell crude oil in Belize on a pro rata

basis with other producers in Belize, according to the quantity of crude oil

production of each producer in each year. The Government shall give the

Contractor at least six (6) months notice in advance of such requirement and the

term of supply will be on an annual basis. The price for such sales shall be the

price as calculated pursuant to paragraph 10.2 above.

11.7 If the Government elects to exercise its rights under paragraph 11.6, it shall notify

the Contractor in accordance with the provisions of paragraph 11.2 relating to the

Government's election to take royalty payment in kind. The amounts to be taken

shall be based upon estimates, including those contained in the forecast

statement furnished pursuant to paragraph 6.3.2, and final adjustments shall be

made within ninety (90) days of the end of each calendar year on the basis of

actual quantities.

11.8 Not less than six (6) months prior to initial commercial production in any field, the

Contractor shall submit to the Government for approval, proposed procedures

and related operating regulations and financial terms covering the scheduling,

storage and lifting of crude oil from such field. The procedures, regulations and

terms shall comprehend the subjects necessary to efficient and equitable

operations including, but not limited to: rights of parties, notification time,

maximum and minimum quantities, duration of storage, scheduling, conservation,

spillage, liabilities of the parties, and penalties for over and under lifting, safety

and emergency procedures.



ARTICLE XII

Payment Procedure



12.1 All payments due to the Government hereunder shall be made in United States

dollars at a bank to be designated by the Government, or at the Contractor's

election, such other currency as is acceptable to the Government.



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12.2 All payments due to the Contractor hereunder shall be made in United States

dollars at a bank to be designated by the Contractor, or, at the Government's

election, such other currency as is acceptable to the Contractor.

12.3 Except as otherwise expressly provided herein, all payments required to be made

pursuant to this Agreement shall be made within thirty (30) days following the end

of the calendar month in which the obligation to make such payment occurs.

12.4 If any payment is not made when due, such unpaid amount shall bear interest

from and after the due date at an interest rate compounded annually at two

percent (2%) greater than the interest rate charged by any Commercial Bank in

Belize to prime commercial customers for ninety (90) day loans as in effect from

time to time until the date of payment.



ARTICLE XIII

Surface Rentals



13.1 The Contractor shall be liable for payment of such fees and surface rentals as are

stipulated in the Petroleum Regulations 1992. The fees payable for each year

shall be paid in advance and in accordance with paragraph 12.3. The fees for

the first year shall be paid within one month with reference to the effective date of

this Agreement.



ARTICLE XIV

Natural Gas



14.1 The Contractor shall have the right to use associated natural gas for petroleum petroleu a



Perenco Belize Limited



the Contractor shall notify the Government of the same and upon such

notification, the Government and the Contractor shall, as soon as practicable

thereafter, meet together with a view to reaching an agreement on the

production, processing and sale of such gas. In the event the Contractor chooses

not to process and sell associated natural gas, the Government may elect to off­

take at the outlet flange of the gas-oil separator and use such associated natural

gas which is not required for petroleum operations. There shall be no charge to

the Government for such associated natural gas, provided that the cost to gather

such associated natural gas in the field at the point of being flared and to process

and utilize it shall be for the account of the Government.

14.2 Where non-associated natural gas is discovered in the contract area and the

Contractor has, pursuant to paragraph 6.2 informed the Government that the

discovery is of potential commercial interest, the Government and the Contractor

will, on completion of the appraisal programme relating to such discovery, or

sooner if so agreed, meet together with a view to reaching an agreement on the

development, production, processing, utilization, disposition or sale of such gas.

14.3 In the event that the development, production, processing, utilization, disposition

or sale of natural gas from the contract area is determined by the parties to be

economically feasible in accordance with this Article XIV, the costs of

development and production of the same from the reservoir to the delivery point,

and the revenue derived therefrom, shall, unless otherwise agreed pursuant to

paragraphs 14.1 and 14.2, be included in petroleum operations expenditures and

gross revenues, respectively, for all purposes of this Agreement, subject to the

accounting procedures prescribed by the Income Tax Commissioner.

14.4 The price to be paid for natural gas, or the value to be attributed thereto shall ­

14.4.1 for sales in arm's length commercial transactions, be equal to the price actually

realized by the Contractor for such Natural Gas at the delivery point;

14.4.2 for sales other than in arm's length commercial transactions, be determined by

agreement between the Government and the Contractor, provided, however, that

such price or value shall reflect the following: (i) the quality and quantity of the

natural gas (ii) the price at which sales of natural gas from other sources in

Belize, if any, are then being made, (iii) the price at which sales, if any, of natural

gas imported into Belize are being made, (iv) the purpose for which the natural



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gas is to be used, and (v) the international market price of competing or

alternative fuels or feedstocks.

14.4.3 Sales in arm's length commercial transactions shall mean sales as described in

paragraph 10.4



ARTICLE XV

Taxes



15.1 The Contractor and its contractors and subcontractors shall be obligated to pay

income tax for the applicable calendar year upon net taxable income derived

from petroleum operations pursuant to this Agreement and the Income and

Business Tax Act.

15.2 In each calendar year, the Contractor's income tax shall be payable to the

Government in installments on the last day of each quarter on the basis of the

estimate, and quarterly updates thereto, provided to the Government. The

estimated unpaid liability for income tax for each calendar year as of the current

estimate or quarterly update shall be payable equally over the remaining

quarterly installments for such calendar year. Adjusting payments or refunds, as

the case may be, shall be made within ninety (90) days of the end of the calendar

year based upon the detailed accounts submitted for such calendar year

pursuant to paragraph 26.2 and as approved by the Government.

15.3

(a) The Contractor shall within ninety (90) days of the end of each calendar year,

notify the Government of any and all amou;1ts paid to its contractors with

respect to operations carried out by them in Belize and in turn shall notify its

contractors that they must similarly advise the Government within ninety (90)

days after the end of each calendar year of any and all amounts paid to their

sub-contractors with respect to operations carried out by them in Belize.

(b) The Contractor shall also advise each of its contractors, and shall require

such contractors to likewise notify their subcontractors that for every six (6)

months such contractors and subcontractors shall furnish to the Government

a list of all their Belizean and expatriate personnel, along with the

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remuneration received by each of such personnel, and that they shall be

required, prior to leaving Belize to establish to the satisfaction of the

Government that the necessary income taxes have been paid.

15.4 The Contractor and its contractors and subcontractors and their respective

personnel shall be obligated to pay such reasonable transfer taxes and stamp

duties as may be in effect from time to time at the rates which are generally

applicable to all persons or entities in Belize.

15.5 Except as may be otherwise agreed in writing between the Government and the

Contractor, all transactions giving rise to revenues, costs or expenses which will

be credited or charged to the books, accounts, records and reports prepared,

maintained or submitted hereunder shall be conducted at arm's length or on such

a basis as will assure that all such revenues, costs or expenses will not be higher

or lower, as the case may be, than would result from a transaction conducted at

arm's length on a competitive basis with third parties.



ARTICLE XVI

Exemptions from Custom Duties



16.1 The Contractor and its non-Belizean contractors and subcontractors engaged in

conducting petroleum operations under this Agreement shall, upon application to

and approval by the Minister of Finance, be provided exemptions from customs

duties with respect to the importation of, machinery, equipment, spare parts,

materials, supplies, consumable items, moveable property, and any other items

or articles connected with petroleum operations, subject to the provisions of

paragraph 16.2.

16.2 The exemptions provided in paragraph 16.1 shall not apply to any imported item

when, in the reasonable opinion of the Government, items of the same, or

substantially the same, kind and quality are manufactured locally and are

available for purchase and timely delivery at the Contractor's operating base in

Belize at a price equal to the cost of the imported item(s).



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16.3 The Government reserves the right to inspect the records, documentation or the

physical item or items for which an exemption is or has been provided under

paragraph 16.1 to determine that such item or items are being or have been

imported solely for the purpose for which the exemption was granted.

16.4 The item or items exempt from customs duties hereunder shall not be sold to

third parties (who are not in their own right exempt from such customs duties) for

use or consumption in Belize unless prior written authorization is obtained from

the Government and the importing party pays the tax or duty due on the

assessed value of such item or items at the time of sale.

16.5 Any of the items imported into Belize, whether exempt or non-exempt from

customs duties, may be exported by the importing party at any time without the

payment of any export duties, taxes or imposts.

16.6 "Custom duties" as used herein shall include all duties, taxes, or imposts (except

those charges, as may be in force from time to time, paid to the Government for

actual services rendered such as normal handling and storage charges) which

are payable as a result of the importation of the item or items under

consideration.

16.7 The Contractor shall be exempted from any duty, fee or any other financial

imposts (except those charges paid to the Government for actual services

rendered such as normal handling and storage charges, if any) in respect of the

export of petroleum to which the Contractor is entitled hereunder.

16.8 The Contractor shall not, directly or indirectly, export any petroleum produced

from the contract area to any country or person which the Government has by

law or official pronouncement declared to be hostile or unfriendly.



ARTICLE XVII

Exchange and Currency Controls



17.1 The Contractor shall be subject to the applicable exchange control legislation and

regulations in effect from time to time in Belize, provided, however, that:

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(i)



the Contractor shall be permitted, subject to satisfaction of its obligations of

payment of taxes, bonuses, royalties and other fees to the Government on

a timely basis, to receive and hold the proceeds from the sale of its share of

any petroleum produced in Belize in its offshore banking accounts;



(ii)



the Contractor shall be permitted, subject to satisfaction of its obligations of

payment of taxes, bonuses, royalties and other fees to the Government on

a timely basis, to remit any funds in Belize received from the sale of its

share of any petroleum produced therefrom and which are not required for

conducting the petroleum operations, to its offshore banking accounts;



(iii)



the Contractor shall have the right to establish and maintain local bank

accounts which may be denominated in 6elize dollars or, subject to the

prevailing regulations of the Central Bank of Belize, in US dollars which

may be utilized as necessary for payment of Contractor's obligations in

Belize;



(iv)



no restriction shall be placed on the importation by the Contractor of funds

necessary for carrying out the petroleum operations stipulated in this

Agreement;



(v)



the Contractor shall have the right to pay directly outside of Belize from its

offices abroad for purchases or services for petroleum operations

hereunder, provided, however, that no such payments shall be made to

residents of Belize or to firms using Belize as their main base of operations

(whether natural or juridical) contrary to the Laws of Belize.



ARTICLE XVIII



Title to Equipment



18.1 All equipment and assets which are fixed installations and are not exported by

the Contractor under paragraph 16.5 shall become the property of the

Government, without cost, as soon as this Agreement is terminated.



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ARTICLE XIX





Government Participation





19.1 The Government shall have the option to acquire for itself or for its designee an

undivided and unencumbered working interest of up to ten percent (10%) of the

interest of the Contractor with respect to a particular field where a discovery has

been made and in return therefor shall furnish its participating interest share of

the funds as provided in paragraph 19.3.



19.2 If the Government exercises its option to participate, (a) it shall, within ninety (90)

days following the date of declaration of commercial discovery for the relevant

field, by written notice, inform the Contractor of its decision to exercise its option

to participate in such field and (b) the Contractor (or each corporation, individual

or entity comprising the Contractor at that time [2£0 rata) shall assign and transfer

to the Government or its designee the percentage interest that the Government

has opted to acquire. The Government or its designee shall assume all rights and

obligations of the Contractor pro rata with its participating interest, in connection

with the particular field for which it has exercised its option to participate. The

rights and obligations assumed by the Government or its designee with respect

to its participating interest shall commence from the date of declaration of the

commercial discovery and shall in no case imply any obligation for the

Government or its designee to reimburse the Contractor for any exploration

costs.



19.3 The Government may, upon giving the Contractor reasonable written notice,

require the Contractor to lend the Government up to one hundred percent (100%)

of the funds required to pay the Government's pro-rata share of development

operations expenditure. The loan shall bear interest at three month USOR plus

one percent (1 %). The Government shall make repayments of the loan on a

quarterly basis in an amount equal to thirty percent (30%) of the difference

between the gross revenue attributable to the Government's Participating Interest

in the field and the costs and expenses, including royalty but excluding income

taxes, attributable to the Government's Participating Interest in the field.

Repayments of the loan shall be applied first to accrued and unpaid interest and

the balance shall be applied in reduction of the outstanding principal balance.



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ARTICLE XX

Training and Employment



20.1 The Contractor agrees to train and employ qualified nationals of Belize in its

petroleum operations and, after initial commercial production, will undertake the

schooling and training of nationals of Belize for staff positions, including

administrative and executive management positions. The Contractor will require

its contractors and subcontractors to do the same. The Contractor undertakes to

gradually replace its expatriate staff with qualified nationals of Belize as they

become available. An annual programme for training and phasing in of nationals

of Belize shall be established by the Contractor and shall be submitted for

approval to the Government. Such programme shall be included in the annual

work programmes submitted by the Contractor pursuant to paragraph 5.4. Within

thirty (30) days of the end of each calendar year, the Contractor shall submit a

written report to the Government describing the number of personnel employed,

their nationality, their positions and the status of training programmes for

nationals of Belize.



20.2 The Contractor shall also be required to establish a programme, satisfactory to

the Government, to train personnel of the Government to undertake skilled and

technical jobs in petroleum operations for the Government. Such programme

shall also include provisions for practical training by involving representatives of

the Government in the Contractor's on-the-job training for its staff and in the

preparation of the annual work programme and work programme budgets as

required by paragraph 5.4 (d).

20.3 The Contractor shall also be required to make available annually to the

Government a sum which is not less than twenty-five thousand United States

Dollars (US$25,OOO) for the purposes of:

(a) sending suitable nationals of Belize selected by the Government on

petroleum and energy-related courses at universities. colleges or other

training institutions;

(b) attending petroleum and energy-related conferences and workshops; and/or



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(c) purchasing for the Ministry responsible for petroleum affairs technical books,

professional publications, scientific instruments or other equipment required

by the Ministry.



ARTICLE XXI

Purchases in Belize



21.1



In procurement, the Contractor shall give preference to goods which are

produced or available in Belize and services which are rendered by nationals of

Belize and companies of Belize, provided such goods and services are offered on

terms equal to or better than imported goods and services with regard to quality,

price and availability at the time and in the quantities required.



21.2 Locally produced or available equipment, materials and supplies shall be deemed

equal in price to imported items if the local cost of such locally produced or

available items at the Contractor's operating base in Belize is not more than ten

percent (10%) higher than the cost of such imported items before customs duties

but after transportation and insurance costs have been added.



ARTICLE XXII

Unitization



22.1



If a field is designated within the contract area and such field extends beyond the

contract area to other areas of Belize over which other parties have the right to

conduct exploration, development and production operations the Government

may require that the development of the field and the production of petroleum

therefrom be carried out in collaboration with the other contractors. The same

rule shall be applicable if deposits of petroleum within the contract area, although

not equivalent to a commercial discovery if developed alone, would be deemed to

be a commercial discovery if developed with those parts of the deposits which

extend to areas controlled by other contractors.



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It



22.2 If the Government so requests, the Contractor shall collaborate with other

contractors in preparing a collective proposal for common development and

production of the deposits of petroleum for approval by the Government.

22.3 If the proposal for common development and production has not been presented

within ninety (90) days of the request described in paragraph 22.2, or if the

Government does not approve such proposal, the Government may prepare or

cause to be prepared, for the account of the Contractor and the other contractors

involved, a reasonable plan for common development and production.

If the

Government adopts such plan, the Contractor shall comply with all conditions

established in such plan.

22.4 The Contractor may within twenty eight (28) days from the date on which notice

in writing of such plan has been given to it by the Minister refer the matter to

arbitration pursuant to Article XXIV. In such event the plan shall not be

implemented until the Tribunal renders a decision or the parties agree on a

compromise plan, whichever occurs first.

22.5 This Article XXII shall also be applicable to discoveries of deposits of petroleum

within the contract area which extend to areas that are not within the dominion of

Belize, provided that in these cases the Government shall be empowered to

impose the special rules and conditions which may be necessary to satisfy

obligations under any agreements with international organizations or adjacent

states with respect to the development and production of such deposits of

petroleum.

22.6 Within ninety (90) days following the approval or adoption of a unitization plan for

common development and production, the Contractor shall proceed to operate

under any such plan. If a clause of a cooperative or unitary development and

production plan which by its terms affects the contract area or a part of the same,

contradicts a clause of this Agreement, the clause of the cooperative or unitary

plan shall prevail.



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ARTICLE XXIII

Danger to Persons, Property or Environment



23.1



The Contractor shall act in accordance with the relevant provIsions of

environmental laws and regulations in force from time to time in Belize, including

with respect to requirements for the conduct of environmental studies and the

terms and conditions of any approval or authorisation granted to the Contractor

under the relevant environmental laws and regulations.



23.2 The Contractor shall employ advanced techniques, practices and methods of

operation and take other steps as are necessary and adequate in accordance

with good international oil industry practice, and subject to the requirements of

the laws and regulations specified in paragraph 23.1 to:

(a) protect the environment and prevent pollution;

(b) ensure adequate compensation for damage to the environment proved to

have been directly caused by the carrying out of the activities under this

Agreement by the Contractor; and,

(c) ensure adequate compensation for injury to persons or damage to property

proved to have been directly caused by the carrying out of the activities under

this Agreement by the Contractor.



23.3 Subject to the relevant provisions of environmental laws and regulations in force

from time to time in Belize, the Contractor shall cause two environmental impact

assessment reports to be prepared in accordance with the following

arrangements:

(a) the first environmental impact assessment report, relating to exploration and

appraisal operations, shall, if determined to be required by the Department of

the Environment, be conducted and submitted by the Contractor, as part of

the Contractor's submission of an exploration programme, in order to

determine the effect of the relevant petroleum operations on the environment;

(b) the second environmental impact assessment report, covering field

development and production activities, shall be submitted by the Contractor, as

part of its submission of a development work programme, in order to determine

the effect of the relevant petroleum operations on the environment.



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23.4 The environmental impact assessment reports prepared and submitted by the

Contractor in accordance with paragraph 23.3 shall, in addition to any other

requirements under the relevant environmental laws and regulations, include

proposed environmental management plans to minimize environmental damage,

and shall include measures on the following matters: wildlife and habitat

protection; marine resource protection; prevention of air and water pollution; fuel

storage and handling; waste management and disposal; protection of cultural and

archaeological sites; selection of drilling sites; blow-out prevention; flaring during

completion and testing of gas and oil wells; noise control; and site reclamation

and restoration plans.



23.5 The Contractor shall ensure that the environmental management plans 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 its petroleum operations; and that any agreement entered

into between the Contractor and its sub-contractors relating to its petroleum

operations shall include the terms set out in this Agreement and any established

measures and methods for the implementation of the Contractor's obligations in

relation to the environment under this Agreement.



23.6 Where the activities of the Contractor result in pollution or damage to the

environment or marine life or otherwise, the Contractor shall, in accordance with

good international oil industry practice and subje~J to the environmental laws and

regulations in force 'in Belize, take all necessary measures to effect immediate

remedy of the failure and the effects thereof. If such pollution or damage is the

result of gross negligence or wilful misconduct of the Contractor, the cost of the

remedy or penalties payable under the law shall not be allowable deductions in

the computation of income tax.



23.7 The Contractor shall notify the Government forthwith in the event of any

emergency or accident affecting the environment and shall, in accordance with

good international oil industry practice and subject to the environmental laws and

regulations in force in Belize, take such action as may be prudent and necessary

in such circumstances.



23.8 If after notifying the Government pursuant to paragraph 23.7 the Contractor does

not act promptly so as to control or clean up any pollution or make good any

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damage caused, the Government may, after giving the Contractor reasonable

notice in the circumstances, take any actions which are necessary in accordance

with environmental laws and regulations in force in Belize and the costs and

expenses of such actions shall be recoverable from the Contractor.



23.9 If the Government reasonably determines that any works or installations erected

by the Contractor or any operations conducted by the Contractor endanger or

may endanger persons or third party property or cause pollution or harm wild-life

or the environment to an unacceptable degree, the Government may require the

Contractor to take remedial measures within a reasonable period established by

the Government and to repair any damage to the environment. If the Government

deems it necessary, it may also require the Contractor to discontinue petroleum

operations in whole or in part until the Contractor has taken such remedial

measures or has repaired any damage. In the event that the Contractor fails to

take the remedial measures required by the Government within the time period

established by the Government, the Government may carry out such remedial

measures for the Contractor's account and the Contractor shall additionally be

liable for adequate compensation for any damage to the environment, injury to

persons or damage to property proved to have been directly caused by the

petroleum operations of the Contractor.



ARTICLE XXIV

Arbitration



24.1



In the event of a dispute arising between the Government and the Contractor

concerning the interpretation or application of this Agreement, the parties shall

seek to resolve the dispute by consultations and negotiations.



24.2 Subject to paragraph 24.3, where a dispute cannot be resolved through

consultations and negotiations within a period of six months, either party may do

one of the following:

(a) where the Contractor is duly incorporated, constituted, set up, or otherwise

duly organized under the law of a State Party to the 1965 Convention on the

Settlement of Investment Disputes between States and Nationals of other

States ('the Convention'), refer the dispute to the International Centre for

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Settlement of Investment Disputes ('ICSID') for arbitration pursuant to Article

36 of the Convention;

(b) where the Contractor is not duly incorporated, constituted, set up, or

otherwise duly organized under the law of a State Party to the Convention,

refer the dispute to an ad hoc arbitral tribunal in accordance with the

Arbitration Rules of the United Nations Commission on International Trade

Law (1976), subject to the following provisions:



(i)



The arbitral tribunal shall consist of three arbitrators. Each party

shall select an arbitrator, and those two arbitrators shall then

appoint by mutual agreement a third arbitrator, the Chairperson,

who shall be a national of a third State. All arbitrators shall be

appointed within two months from the date when a party informs the

other party of its intention to submit the dispute to arbitration under

this sub-paragraph.



(ii)



If the necessary appointments are not made within the period

specified above, either party to the 'dispute may, in the absence of

any other agreement, request the Secretary-General of the

Permanent Court of Arbitration to make the necessary

appointments.



(iii)



The arbitral award shall be made in accordance with this

Agreement. The arbitral tribunal shall decide all questions

presented on the basis of:

(a) the laws and regulations of Belize applicable to this Agreement

and other relevant laws, both national and international;

(b) the provisions of the Agreement, and

(c) trade usages and customs of the international petroleum

industry.



(iv)



The place of arbitration shall be Belmopan, Belize.



(v)



The arbitral tribunal shall reach its decision by a majority of votes.



(vi)



The decision of the arbitral tribunal shall be final and binding and

the Parties to the dispute shall abide by and comply with the terms

of its award.



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(vii)



The arbitral tribunal shall state the basis of its decision and give the

reasons for its decision.



(viii)



Each party to the dispute shall bear the cost of its own arbitrator

and its representation in the arbitral proceedings. The cost of the

Chairperson in discharging his o( her duties in relation to the

arbitration and the remaining costs of the arbitration shall be borne

equally by the parties to the dispute. The arbitral tribunal may,

however, direct in its decision that a higher proportion of costs shall

be borne by one or other of the parties to the dispute, and this

award shall be binding on the parties to the dispute.



24.3 In the case of any disputes concerning a matter identified in paragraph 6.2.10 (c)

of Article VI of this Agreement, the procedures relating to the referral of a matter

to a sole-expert for determination shall apply to the resolution of the dispute.

24.4 The language to be used in arbitration proceedings shall be English.



ARTICLE XXV

Termination



25.1 The Government shall have the right to terminate this Agreement upon giving

ninety (90) days written notice of its intention to do so if the Contractor,

(a) fails to make any material monetary payment required by law or under this

Agreement for a period of thirty (30) days after the due date for such payment,

(b) fails to comply with any other material obligation that it has assumed under

this agreement,

(c) fails to comply with the Petroleum Act (8 of 1991) and any lawful acts,

regulations, orders or instructions issued by the Government or any department

or agency of the Government, or

(d) becomes bankrupt, or goes into liquidation because of insolvency or makes a

composition with its creditors.



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25.2 If the circumstance or circumstances that result in termination under paragraph

25.1 (a), (b) or (c) are reasonably remedied by the Contractor within the ninety

(90) days period following the notice of termination as aforesaid, such termination

shall not become effective.

25.3 The Contractor may, following receipt of the notice of termination as aforesaid,

dispute the failures stated in the notice of termination pursuant to paragraphs

24.1 and 24.2. In such case, the notice of termination shall only become effective

if and when there is a final determination under paragraph 24.2 in favour of the

Government.



25.4 If the circumstance or circumstances that would otherwise result in termination

under paragraph 25.1 (b) or (c) are the result of force majeure, then termination

shall not take place so long as such force majeure continue and for such period

thereafter as the Government may determine to be reasonable.

25.5 The termination of this Agreement for whatever reason shall be without prejudice

to the obligations incurred and not discharged by the Contractor prior to the date

of termination.

25.6 In the event of termination pursuant to paragraph 25.1 or 25.8, the Government

may require the Contractor, for a period not to exceed one hundred eighty (180)

days, to continue, for the account of the Government, crude oil or natural gas

production activities until the right to continue such production has been

transferred to another entity.

25.7 Within ninety (90) days after the termination of this Agreement pursuant to

paragraph 25.1 or paragraph 25.8, unless the Minister has granted an extension

of this period, the Contractor shall complete any reasonably necessary action as

directed by the Government to avoid environmental damage or a hazard to

human life or third party property.

25.8 The Contractor shall have the right to terminate this Agreement totally or partially,

(a) with respect to any part of the contract area other than a field then producing,

or that prior thereto had produced, crude oil or natural gas upon giving ninety (90)

days written notice of its intention to do so, and (b) with respect to any field then

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producing, or that prior thereto had produced, crude oil or natural gas upon giving

one hundred and eighty (180 days written notice of its intention to do so. Upon

termination, the provisions of paragraphs 4.6 and 4.7 shall apply.



ARTICLE XXVI

Books, Accounts and Audits, Records, Reports and Inspections



26.1



The Contractor shall be responsible for keeping complete accounts, books and

records reflecting all petroleum operations expenditures and gross revenues

consistent with generally accepted procedures and standards in the international

petroleum industry and in accordance with accounting procedures prescribed for

petroleum operations by the Income Tax Commissioner.



26.2 Within ninety (90) days after the expiration of each calendar year, the Contractor

shall submit to the Government detailed accounts showing all petroleum

operations expenditures and all gross revenues during the past calendar year.

Before submission to the Government, the accounts shall be audited and certified

by an independent chartered accountant or certified public accountant acceptable

to both parties, at the expense of the Contractor. It is understood that the

Government retain the authority to review and audit the Contractor's accounts,

books and records with respect to petroleum operations conducted hereunder

either directly or through an independent accountant designated by the

Government.

26.3 The Government and its duly authorized representatives shall have full and

complete access to the contract area at all reasonable times with a right to

observe petroleum operations and shall have the right to inspect all assets,

records, books, accounts and data kept by the Contractor relating to petroleum

operations and this Agreement.

In doing so, the Government and its

representatives shall not unduly interfere with the Contractor's petroleum

operations. However, the Government and its representatives may make a

reasonable number of surveys, drawings, tests and copies for the purpose of

implementing this Agreement.

In so doing, the Government and its

representatives shall be entitled to make reasonable use of the equipment and



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instruments of the Contractor provided that no damage to the equipment or

instruments or impediment to the petroleum op.srations hereunder shall result

from such use. The Government shall indemnify and reimburse the Contractor for

any loss or damage which may in fact result from any such use of equipment and

instruments, provided that such loss or damage is reported to the Government

within twenty-four (24) hours from the time of such inspection. The Government

and its representatives shall be given reasonable assistance by the Contractor

for such functions, and the Contractor shall afford to the Government and its

representatives, field office facilities and such other additional facilities and

privileges afforded to its own personnel in the field that may be necessary to

carry out the functions.

26.4 The Contractor shall prepare and maintain accurate and current records of its

activities in the contract area hereunder. The Contractor shall furnish the

Government in conformity with the applicable regulations, and as the

Government may reasonably require, information, reports and data concerning its

activities and operations under this Agreement.

26.5 The Contractor shall save and keep for the duration of this Agreement all unused

cores and samples taken from the wells drilled, which shall be forwarded to the

Inspector of Petroleum or his authorized representatives at such time and in the

manner directed by the Government. All cores and samples acquired by the

Contractor shall be available for inspection by the Inspector of Petroleum or his

authorized representatives at all reasonable times. Unless previously forwarded

to the Government pursuant to instructions given under this paragraph, the

Contractor shall forward to the Government all remaining cores and samples

upon the expiration or termination of this Agreement.

26.6 Unless otherwise agreed to by the Government, in the case of exporting any rock

or petroleum samples from Belize for the purpose of testing and analysis,

samples equivalent in size and quantity shall, before such exportation, be

delivered to the Inspector of Petroleum.

26.7 Originals of records and other data can be exported only with the permission of

the Government, provided, however, that magnetic tapes and any other data

which must be processed or analyzed outside Belize may be exported if a

comparable record is maintained in Belize and provided that such exported

records and data shall be repatriated to Belize.



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26.8 The Contractor shall provide to the Inspector of Petroleum in appropriate form all

original data resulting from petroleum operations, including, but not limited to,

geological, geophysical, petrophysical engineering, well logs, production data

and completion status reports and any other data which the Contractor may

compile during the term hereof including all reports, analyses, interpretations,

maps and evaluations thereof prepared by the Contractor and any contractors,

subcontractors or consultants to the Contractor or by affiliated companies, and

cuttings of all samples that have been obtained or compiled during the term

hereof ("data"). The Government shall have title to all such data. Such data shall

not be disclosed to third parties by the Government prior to relinquishment of the

area to which they relate, or prior to the end of the exploration period if such area

is not sooner relinquished, provided, however, that the Government may make

copies available to professional consultants, legal counsel, accountants,

underwriters, lenders and such Government entities as may need to be made

aware thereof or have the right to require disclosure. In any event, the

Contractor may retain copies of all such data. The Contractor shall not disclose

such data to any third parties without the Government's prior written consent,

provided, however, that the Contractor may make copies available to professional

consultants, legal counsel, accountants, underwriters, lenders, affiliated

companies and contractors and subcontractors of the Contractor and such

government entities as may need to be made aware thereof or have the right to

require disclosure. Any data which are disclosed by the Government or the

Contractor to third parties pursuant to this paragraph (26.8) shall be disclosed on

terms which ensure that such data are treated as confidential by the recipient.

To the extent that there is any inconsistency between the provisions of this

paragraph (26.8) and the provisions of Article XXXIII, the provisions of this

paragraph (26.8) shall govern.



ARTICLE XXVII

Insurance and Indemnification



27.1 To ensure that the Contractor shall meet its obligations to third parties, or to

Government Clgencies, that might arise in the event of damage or injury (including

environmental damage or injury, removal of wrecks and cleaning up caused by

accidents) caused by petroleum operations, notwithstanding that the damage is

accidental, the Contractor shall maintain in force a third party liability insurance

policy covering the activities of itself, its contractors and subcontractors and the

employees of all such parties.

Such insurance policy shall include the



- 51 ­



Perenco Belize Limited



Government as an additional insured, shall waive subrogation against the

Government, and shall provide that it may not be cancelled except upon thirty

(30) days prior written notice to the Government. A certificate evidencing such

insurance policy shall be furnished to the Government within ninety (90) days of

the effective date. The limits, coverage, deductibles and other terms thereof shall

be subject to approval in writing by the Government. To the extent that such third

party liability insurance is unavailable or is not obtained, or does not cover part or

all of any claims or damage caused by or resulting from petroleum operations,

the Contractor shall remain fully responsible and shall defend, indemnify and hold

the Government harmless against all such c1airr,s, losses and damages of any

nature whatsoever.



27.2 The Contractor shall indemnify, defend and hold the Government harmless

against claims, losses and damages of any nature whatsoever, including, without

limitation, claims for loss or damage to property or injury or death to persons,

caused by or resulting from any petroleum operations conducted by or on behalf

of the Contractor, provided that the Contractor shall not be held responsible to

the Government under this paragraph (27.2) for any loss, claim, damage or injury

caused by or resulting from any negligent action of personnel of the Government.



27.3 The Contractor shall contribute two tenths of one percent (0.2%) of the value of

the annual gross production of crude oil and/or natural gas produced and saved

in each calendar year and not used or consumed in petroleum operations to a

Common Fund to be held in trust by the Government and managed for the sole

purpose of indemnification against any or all environmental damages caused

during the petroleum operations.



27.4 Nothing contained in paragraph (27.3) above shall be construed to relieve the

Contractor of its obligations of indemnification as set out in this Agreement.



- 52­



Perenco Belize Limited



ARTICLE XXVIII

Assignment



28.1 The Contractor may assign, transfer, conveyor otherwise dispose of any part or

all of its rights or interest under this Agreement with the prior written consent of

the Government, which consent shall not be unreasonably withheld.

28.2 Notwithstanding the provisions of paragraph 28.1, if the Contractor assigns to

any affiliated company, the Contractor shall remain fully liable for the

performance of this Agreement and shall be fully liable for the performance of

any such assignee.

28.3 In the case of an assignment to any non-affiliated company, the Contractor shall

provide to the Government an unconditional undertaking by the assignee to

assume all obligations of the Contractor under this Agreement. Notwithstanding

such undertaking, the Contractor shall remain jointly and severally liable with the

assignee for performance of the obligations of the Contractor unless the

Contractor assigns its entire interest under this Agreement.



ARTICLE XXIX

Law of the Agreement



29.1



This Agreement shall be construed under, governed by and interpreted in

accordance with the laws of Belize and such principles of international law as

may be applicable.



ARTICLE XXX

Force Majeure



- 53­



Perenco Belize Limited



30.1



Except as otherwise provided in this Article, each party shall be excused from

complying with the terms of this Agreement, except for payment of monies due,

for so long such compliance is prevented by strikes, wars (declared or

undeclared), acts of God, or by any act or cause that is reasonably beyond the

control of such party, such causes being herein called "force majeure". In the

event that either party hereto is rendered unable, wholly or in part, by any of

these causes to carry out its obligations under this Agreement, such party shall

give notice and details of force majeure in writing to the other party within seven

(7) days after its occurrence. In such cases, the obligations of the party giving

the notice shall be suspended during the continuance of any inability so caused.

Such party shall do all that is reasonably within its power to remove such cause

and to mitigate the consequences. Such party shall also promptly notify the other

party as soon as conditions of force majeure no longer prevent that party from

carrying out its obligations and following such notice shall resume its obligations

as soon as reasonably practicable.



ARTICLE XXXI

Entire Agreement and Amendments



31.1



This Agreement embodies the entire agreement and understanding between the

Contractor and the Government relative to the subject matter hereof, and

supercedes and replaces any provisions on the same subject in any other

Agreement between the parties, whether written or oral, prior to the date of this

agreement.

This Agreement may not be amended, modified, varied or

supplemented except by an instrument in writing signed by the Contractor and

the Government.



ARTICLE XXXII

Waiver



32.1



Performance of any condition or obligation to be performed hereunder shall not

be deemed to have been waived or postponed except by an instrument in writing

signed by the party which is claimed to have granted such waiver or

postponement.



- 54­



Perenco Belize Limited



32.2 No waiver by any party of anyone or more obligations or defaults by any other

party in the performance of this Agreement shall operate or be construed as a

waiver of any other obligations or defaults whether of a like or of a different

character.



ARTICLE XXXIII



Confidentiality



33.1



This Agreement and any confidential information of any party hereto which

becomes known to the other party in connection with the performance of this

Agreement shall not be published or disclosed to third parties without the former

party's written consent, except as otherwise provided herein, and provided

however that such other party may communicate confidential information to legal

counsel, accountants, other professional consultants, underwriters, lenders,

agents, contractors or shipping companies to the extent necessary in connection

with this Agreement, with the obligation of the parties receiving such information

to maintain confidentiality, or to an agency of the Government of the country of

the Contractor having authority to require such disclosure.

The term "confidential information" as used herein shall mean information

identified as "confidential" by the party originally in possession of it and disclosed

to the other party, excluding information previously known to the other party or

information which is publicly known (except through disclosure of the other party

in violation of this Article XXXIII) or information that comes into the legitimate

possession of such other party. The term "confidential information" shall not

include information about any money or other consideration paid by the

Contractor to the Government or a person acting on behalf of the Government

under or in connection with the terms of this Agreement.



33.2 The confidentiality obligations of this Article XXXIII

relinquishment of the area to which the informatio;1 relates.



- 55­



shall



expire



upon



Perenco Belize Limited



ARTICLE XXXIV

Notices



34.1 All notices and other communications required or permitted hereunder or any

notices that one party may desire to give to the other party shall be in writing in

the English language and deemed to have been properly delivered if personally

handed to an authorized representative of the p~rty for whom intended, or sent

by registered airmail or by facsimile transmission at or to the address of such

party for whom intended, or such other addresses as any party may from time to

time designate by notice in writing to the other party.



- 56­



Perenco Belize Limited



EXHIBIT "A"



DESCRIPTION OF THE CONTRACT AREA





I



BLOCK



SUB-BLOCKS



11



SQUARE

KILOMETERS



ACRES



A thru Y



NO. OF

SUB­

BLOCKS

25



100



24,710.54



12



A thru Y



25



100



24,710.54



18



A thru Y



25



100



24,710.54



19



A thru Y



25



100



24,710.54



21



A thru Y



25



100



24,710.54



22



12.5



50



12,355.27



25



A,B,F,G,K,L,P,O,U,v, half of

C,H,M,R,W

A thru Y



25



100



24,710.54



26



A thru Y



25



100



24,710.54



38



A thru Y



25



100



24,710.54



39



A,B,F,G,K,L,P,O,U,V, half of

C,H,M,R,W



12.5



50



12,355.27



42



A thru Y



25



100



24,710.54



43



A thru Y



25



100



24,710.54



59



E"J,O,S,T,X,Y



7



28



6,918.95



60



A thru Y



25



100



24,710.54



61



A thru Y



25



100



24,710.54



62



A thru Y



25



100



24,710.54



63



A thru Y



25



100



24,710.54



64



A thru Y



25



100



24,710.54



80



D,E,I"J,N,O,S,T,X,Y



10



40



9,884.22



81



A thru Y



25



100



24,710.54



- 57­



I



Perenco Belize Limited



82



A thru Y



25



100



24,710.54



83



A thru Y



25



100



24,710.54



84



A thru Y



25



100



24,710.54



85



A thru Y



25



100



24,710.54



100



D,E,I"J,N,O,S,T,X,Y



10



40



9,884.22



101



A thru Y



25



100



24,710.54



102



A thru Y



25



100



24,710.54



103



A thru Y



25



100



24,710.54



104



A thru Y



25



100



24,710.54



105



A thru Y



25



100



24,710.54



120



D,E,I"J,N,O,S,T,X,Y



10



40



9,884.22



121



A thru Y



25



100



24,710.54



122



A thru Y



25



100



24,710.54



123



A thru Y



25



100



24,710.54



124



A thru Y



25



100



24,710.54



125



A thru Y



25



100



24,710.54

802,598.35



TOTAL



- 58­



I



I



EXHIBIT "B"



MAP OF CONTRACT AREA





r



'''-1\



/



(



/



-;



1/



/

W

h



11"

I'-.



..



~



, "'"

,....,



If

rP



/



I

I



/



..­

IJ



\



(



l(



)



r:. LJ



\

v



V



""\

'""""



\



.....,

'-.xl



~



1/ I



/./'



1



fj



If



t8toooo



~



Ir"



i->



I



If



r



\



f-/







Perenco Belize Limited Contract Area



- 59­



C rtbt ean Sea



Perenco Belize Limited



EXHIBIT



"e"





BANK GUARANTEE





Ministry of Finance,

Government of Belize,

Belmopan, Belize



Gentlemen,

RE: OUR IRREVOCABLE LETTER OF GUARANTEE NO.

In



compliance with



the request of



("the



Contractor"), we, (Name of Bank), issue this unconditional irrevocable letter of

guarantee in



your favour for a sum not exceeding



States Dollars (US $



United



), which represents the total minimum



exploration expenditures set forth in paragraph 6.1.1 of the Agreement ("Agreement"),

dated



, 200 , between the Contractor and the Government of



Belize ("Government"), relating to petroleum exploration, development and production in

the territory of Belize, to guarantee the Contractor's faithful performance of its minimum

exploration expenditures obligations as provided for in the Agreement, the said sum of

_ _ _ _ _ _ _ _ United States Dollars (US $



) to be reduced



at the end of each contract year, as defined in the Agreement, by the amount stipulated

to be expended in such contract year, if such amount is in fact expended as evidenced

by a signed certificate from the Government, provided, however, that said sum shall

under no circumstances be reduced below the stipulated minimum exploration

expenditures for the remaining contract year of the initia: exploration period, as set forth

in paragraphs 6.1.1 of the Agreement, as adjusted in accordance with paragraphs 6.1.3

and 6.1.4 of the Agreement as evidenced by a signed certificate from the Government.



- 60­



Perenco Belize Limited



The terms and conditions of this Letter of Guarantee are as follows:



1.



The said amount, or any part thereof, shall be paid to you upon our receipt of your

written statement that the amount claimed is duly payable under the Agreement.



2.



We hereby waive diligence, presentment, demand for payment, protest, any

requirement that the Government exhaust any right or power or take any action

against the Contractor, all notices (whether of non-payment by the Contractor,

dishonour, protest or otherwise) and all demands whatsoever.



Our obligations



hereunder are continuing, absolute and unconditional, and will not be in any way

affected by giving of time or any forbearance by the Government, the waiver or

consent by the Government with respect to any provisions of the Agreement, and

irrespective of the validity, regularity, enforceability or value of the Agreement, or

by any other circumstances which might otherwise constitute a legal or equitable

discharge or defense of a surety or guarantor, all of which are hereby expressly

waived.



3.



Our obligations hereunder shall be paid in United States Dollars to the bank

account designated by the Government, free and clear of and without reduction by

reason of any and all present and future taxes, levies, assessed, imposed or

collected with respect thereto by the Government of



or



any political sub-division or taxing authority thereof or therein. We shall bear and

pay any and all fees and expenses in relating to or in connection with this Letter of

Guarantee.



4.



In order to give effect to this Letter of Guarantee, we hereby declare that the

Government shall be at liberty to act as though we were the principal debtor, and



- 61 ­



Perenco Belize Limited



we hereby waive all and any of the rights as surety which may at any time be

inconsistent with any of the above provisions.



S.



Any claim or demand under this Letter of Guarantee shall be presented to us on or

before the expiration of the date of the validity of the Letter of Guarantee.



6.



This Letter of Guarantee shall be effective immediately and expire ninety (90) days

after the end of the initial exploration period as defined in the Agreement, and

thereafter automatically without any formality become null and void for all its

effects and this Letter of Guarantee shall be returned to us immediately.



Yours very truly,



(Name of Bank)



- 62­



Perenco Belize Limited



IN WITNESS WHEREOF the Government and the Contractor have hereto set their

hands and seals the day and year first herein before written.



SIGNED, SEALED AND DELIVERED



)



by FLORENCIO MARIN, Minister of Natural



)



Resources and the Environment



)



for and on behalf of the



)



Government of Belize



)



In the presence of:



~





WIT~



SIGNED, SEALED AND DELIVERED



)



by ARTHUR DE FAUTEREAU



)



for and on behalf of Perenco Belize Limited



)



In the presence of:



~"'----~WITNESS



- 63­



Perenco Belize Limited



I, FLORENCIO MARIN, Minister of Natural Resources and the Environment hereby

acknowledge that I did sign, seal and deliver the within written document as my act and

deed.

Acknowledge at BELMOPAN this 29 th day of January, 2008.



Before me,



HIEF EXECUTIVE OFFICER



BE IT REMEMBERED that on the 29 th ay of January, 2008 personally appeared before

me the within named FLORENCIO

sign, seal an

signature"



ARIN and acknowledged before me that he did



.en document as his act and deed and that the

\



.



" is in his own proper handwriting.



,/'



jl UL

CHIEF EXECUTIVE OFFICER



- 64­



Perenco Belize Limited



I, ARTHUR DE FAUTEREAU, hereby acknowledge that I did sign, seal and deliver the

within written document as my act and deed for and on behalf of Perenco Belize

Limited.

Acknowledge at BELMOPAN this 29 th day of January, 2008.



Before me,



J



CHIEF EXECUTIVE OFFICER

BE IT REMEMBERED that on the 29 th day of January, 2008 personally appeared before



me the within named ARTHUR DE FAU"rEREAU and acknowledged before me that he

did sign, seal and deliver the within-written document as his act



nd deed for and on



behalf of Perenco Belize Limited and that the signature"

is in his own proper handwriting.



CHIEF EXECUTIVE OFFICER



- 65­



"



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

hundred and fifty-nine (259) folios of seventy-two (72) words each and twenty-seven

(27) words over and no more.



AS WITNESS my hand this 29th day of January, 2008.



~~.

This Document was prepared and drawn in the Ministry of Natural Resources and the

Environment.



IN PEeTOR OF PETROLEUM



- 66­