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EX-10.51

17

PRODUCTION SHARING CONTRACT PANNA & MUKTA



PRODUCTION SHARING CONTRACT



EXHIBIT 10.51



AMONG

THE GOVERNMENT OF INDIA

AND

OIL & NATURAL GAS CORPORATION LIMITED

AND

RELIANCE INDUSTRIES LIMITED

AND

ENRON OIL & GAS INDIA LTD.



WITH RESPECT TO CONTRACT AREA



ARTICLE

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.



IDENTIFIED AS PANNA AND MUKTA FIELDS

TABLE OF CONTENTS

CONTENTS

Preamble

Definitions

Duration

Relinquishment

Work Programme

Management Committee

Operatorship and Operating Agreement

General Rights and Obligations of the Parties

Government Assistance

Discovery, Development and Production

Unit Development

Measurement of Petroleum

Protection of the Environment

Recovery of Costs

Production Sharing of Petroleum between Contractor

and Government

Taxes, Royalties, Rentals, etc.

Payment

Customs Duties

Domestic Supply, Sale, Disposal and Export of Crude Oil

Valuation of Oil

Currency and Exchange Control Provisions

Natural Gas

Employment, Training and Transfer of Technology

Local Goods and Services

Insurance and Indemnification

Records, Reports, Accounts and Audit

Information, Data, Confidentiality, Inspection

and Security

Title to Petroleum, Data and Assets

Assignment of Interest

Guarantee

Termination of Contract

Force Majeure

Applicable Law and Language of the Contract

Sole Expert, Conciliation and Arbitration

Entire Agreement, Amendments, Waiver and Miscellaneous

Certificates



36.



Notices



APPENDICES:

Appendix A



-



Description of Contract Area



Appendix B



-



Map of Contract Area



Appendix C



-



Accounting Procedure to Production Sharing

Contract



Appendix D



-



Calculation of the Investment Multiple for

Production Sharing Purposes



Appendix E



-



Form of Financial and Performance Guarantee



Appendix F



-



Equipment



Appendix G



-



Development Commitment Specified by the

Companies



Appendix H



-



Production Profile of the Panna and Mukta

Fields







This Contract made and entered into as of the 22nd day of December 1994

by and among:

THE PRESIDENT OF INDIA, acting through the Joint Secretary

(Exploration), Ministry of Petroleum and Natural Gas (hereinafter

referred as Government);

AND

OIL & NATURAL GAS CORPORATION LIMITED (ONGC), a body corporate established under

the provisions of the Companies Act, 1956, which expression shall include its

successors and such assigns as are permitted under Article 28 hereof acting

through its duly authorized Chairman & Managing Director;

AND

RELIANCE INDUSTRIES LTD. ("RIL"), a body corporate established under the laws of

India, which expression shall include its 35 successors and such assigns as are

permitted under Article 28 hereof acting through its duly authorized Chief

Executive Officer (Oil & Gas);

AND

ENRON OIL & GAS INDIA LTD. ("EOGIL"), a body corporate established under the

laws of the Cayman Islands, which expression shall include its successors and

such assigns as are permitted under Article 28 hereof acting through its duly

authorized (Vice) President;

WITNESSETH:

WHEREAS

1.

By virtue of Article 297 of the Constitution of India,

Petroleum in its natural state in the Territorial Waters and

the Continental Shelf of India is vested in the Union of

India;

2.



The Territorial Waters, Continental Shelf, Exclusive Economic Zone And

Other Maritime Zones Act, 1976 (No. 80 of 1976) provides for the grant

of a Lease or letter of authority by the Government to explore and

exploit the resources of the Continental Shelf;



3.



The Oil Fields (Regulation and Development) Act, 1948, (53 of 1948)

(hereinafter referred to as "the Act") and the Petroleum and Natural

Gas Rules, 1959, made thereunder (hereinafter referred to as "the

Rules") make provision inter alia for the regulation of Petroleum

Operations and the grant of petroleum exploration licenses and mining

leases for exploration and development of Petroleum in India;



4.



The Act and the Rules provide for the grant by the Government of mining

leases in respect of the Territorial Waters and the Continental Shelf,

and the Contractor is being duly granted a mining lease to carry out

Petroleum Operations in that area offshore identified as Panna and

Mukta Fields, more particularly described in Appendices A and B;



5.



The Government desires that the Petroleum resources which may exist in

the Contract Area be discovered and exploited with the utmost

expedition in the overall interest of India in accordance with sound

international petroleum industry practices;



6.



The Government is satisfied that it is in the public interest to enter

into this Contract on terms different from those specified in Section

12 of the Oil Fields (Regulations and Development) Act, 1948, and the

Government is entering into this Agreement on the terms and conditions

specified herein.



7.



EOGIL and RIL have represented that they have, or will acquire

and make available, the necessary financial and technical

resources and the technical and industrial competence and

experience necessary for proper discharge and/or performance

of all obligations required to be performed under this

Contract in accordance with good international petroleum

industry practices and will provide guarantees as required in

Article 29 for the due performance of their undertakings

hereunder;



8.



The Parties desire to enter into this Contract with respect to the

Contract Area referred to in Appendices A and B on the terms and

conditions herein set forth.



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

herein contained, IT IS HEREBY AGREED between the Parties as follows:

2

ARTICLE 1

DEFINITIONS

In this Contract, unless the context requires otherwise, the

following terms shall have the meaning ascribed to them hereunder:

1.1



"Accounting Procedure" means the principles and procedures

of accounting set out in Appendix C.



1.2



"Affiliate" means a company that directly or indirectly controls or

is controlled by a Party to this Contract or a company which

directly or indirectly controls or is controlled by a company which

controls a Party to this Contract, it being understood that

"control" means ownership by one company of more than fifty percent

(50%) of the voting securities of the other company, or the power

to direct, administer and dictate policies of the other company

even where the voting securities held by such company exercising

such effective control in that other company is less than fifty

percent (50%) and the term "controlled" shall have a corresponding

meaning.



1.3



"Appendix" means an Appendix attached to this Contract and

made a part hereof.



1.4



"Appraisal Programme" means a programme, approved by the Management

Committee for the appraisal of an Existing or New Discovery of

Petroleum in the Contract Area for the purpose of delineating the

Petroleum Reservoirs to which the Discovery relates in terms of

thickness and lateral extent and determining the characteristics

thereof and the quantity and quality of recoverable Petroleum

therein.



1.5



"Appraisal Well" means a Well drilled within the Contract Area

pursuant to an approved Appraisal Programme.



1.6



"Arms Length Sales" means sales of Petroleum made freely on the

open international market, in freely convertible currencies,

between willing and unrelated sellers and buyers and in which such

buyers and sellers have no contractual or other relationship,

directly or indirectly, or any common or joint interest as is

reasonably likely to influence selling prices and shall, inter

alia, exclude sales (whether direct or indirect, through brokers or

otherwise) involving Affiliates, sales between entities comprising

the Contractor, sales between governments and government-owned



entities, counter trades, restricted or distress sales, sales

involving barter arrangements and generally any transactions

motivated in whole or in part by considerations other than normal

commercial practices.

1.7



"Article" means an article of this Contract and the term

"Articles" means more than one Article.

3



1.8



"Associated Natural Gas" or "ANG" means Natural Gas

occurring in association with Crude Oil either as free Gas

or in solution, if such Crude Oil can by itself be

commercially produced.



1.9



"Barrel" means a quantity or unit equal to 158.9074 litres

(forty-two (42) United States gallons) liquid measure, at a

temperature of sixty (60) degrees Fahrenheit (15.56 degrees

Centigrade) under one atmosphere of pressure (14.7 psia).



1.10



"Basement" means any igneous or metamorphic rock, or rock or any

stratum of such nature, in and below which the geological structure

or physical characteristics of the rock sequence do not have the

properties necessary for the accumulation of Petroleum in

commercial quantities and which reflects the maximum depth at which

any such accumulation can be reasonably expected in accordance with

the knowledge generally accepted in the international petroleum

industry.



1.11



"Calendar Month" means any of the twelve (12) months of the

Calendar Year unless specified otherwise.



1.12



"Calendar Quarter" means a period of three consecutive Calendar

Months commencing on the first day of January, April, July and

October of each Calendar Year.



1.13



"Calendar Year" means a period of twelve consecutive months

according to the Gregorian calendar commencing with the first day

of January and ending with the thirty-first day of December.



1.14



"Commercial Discovery" means a Discovery which, when produced, is

likely to yield a reasonable profit on the funds invested in

Petroleum Operations, after deduction of Contract Costs, and which

has been declared a Commercial Discovery in accordance with the

provisions of Article 9 and/or Article 21, after consideration of

all pertinent operating and financial data such as recoverable

reserves, sustainable production levels, estimated development and

production expenditures, prevailing prices and other relevant

technical and economic factors according to generally accepted

practices in the international petroleum industry.



1.15



"Commercial Production" means production of Crude Oil or Natural

Gas or both from a Field within the Contract Area and delivery of

the same at the relevant Delivery Point under a programme of

regular production and sale.



1.16



"Company" means either EOGIL or RIL.



1.17



"Companies" means EOGIL and RIL.



1.18



"Condensate" means those low vapour pressure hydrocarbons

obtained from Natural Gas through condensation or extraction

4

and refers solely to those hydrocarbons that are liquid at normal

surface temperature and pressure conditions (provided that in the

event Condensate is produced from an Oil Field and is segregated

and transported separately to the Delivery Point, then the

provisions of this Contract shall apply to such Condensate as if it

were Crude Oil.)



1.19



"Contract" means this agreement and the Appendices attached hereto

and made a part hereof and any amendments made thereto pursuant to

the terms hereof.



1.20



"Contract Area" means the area described in Appendix A and

delineated on the map attached as Appendix B, or any portion of the

area remaining after relinquishment or surrender from time to time

pursuant to the terms of this Contract.



1.21



"Contract Costs" means Exploration Costs, Development Costs,

Production costs, and all other costs related to Petroleum

Operations as set forth in Section 3 of the Accounting Procedure.



1.22



"Contract Year" means a period of twelve consecutive months counted

from the Effective Date or from the anniversary of the Effective

Date.



1.23



"Contractor" means EOGIL, RIL and ONGC.



1.24



"Cost Petroleum" means the portion of the total volume of Petroleum

produced and saved from the Contract Area which the Contractor is

entitled to take from the Contract Area in a particular period for

the recovery of Contract Costs as provided in Article 13.



1.25



"Cost Recovery Limit" shall have the meaning given in

Article 13.1.2.



1.26



"Crude Oil" means crude mineral oil, asphalt, ozokerite and all

kinds of hydrocarbons and bitumens, both in solid and in liquid

form, in their natural state or obtained from Natural Gas by

condensation or extraction, including distillate and Condensate

when commingled with the heavier hydrocarbons and delivered as a

blend at the Delivery Point but excluding verified Natural Gas.



1.27



"Delivery Point" means, except as otherwise herein provided or as

may be otherwise agreed between the Government and the Contractor,

the point at which Petroleum reaches the upstream weld of the

outlet flange of the delivery facility, either offshore or onshore

and different Delivery Points may be established for purposes of

sales to the Government, export or domestic sales.



1.28



"Development Area" means that part of the Contract Area

corresponding to the area of an Oil Field or Gas Field delineated

in simple geometric shape, together with a

5

reasonable margin of additional area surrounding the Field

consistent with international petroleum industry practice and

approved by the Management Committee or the Government, as the case

may be.



1.29



"Development Costs" means those costs and expenditures

incurred in carrying out Development Operations, as

classified and defined in Section 2 of the Accounting

Procedure and allowed to be recovered in terms of Section 3

thereof.



1.30



"Development Operations" means operations conducted in accordance

with the Development Plan and shall include, but not be limited to,

the purchase, shipment or storage of equipment and materials used

in developing Petroleum accumulations, the drilling, completion,

Recompletion and testing of Development Wells, the drilling,

completion and Recompletion of Wells for Gas or water injection,

the laying of gathering lines, the installation of offshore

platforms and installations, the installation, hook up and

commissioning of separators, tankage, pumps, artificial lifting and

other producing and injection facilities required to produce,

process and transport Petroleum into main oil storage or Gas

processing facilities, either onshore or offshore, including the

laying of pipelines within or outside the Contract Area, storage

and Delivery Point or Points, the installation of storage or Gas

processing facilities, the installation of export and loading

facilities and other facilities required for development and

production of the Petroleum accumulations and for the delivery of

Crude Oil and/or Gas at the Delivery Point(s) and also including

incidental operations not specifically referred to herein as

required for the most efficient and economic development and



production of the Petroleum accumulations in accordance with good

international petroleum industry practices.

1.31



"Development Plan" means a plan containing proposals

required under Article 9 or Article 21.



1.32



"Development Well" means a Well drilled, deepened, completed, or

Recompleted after the date of approval of the Development Plan

pursuant to Development Operations or Production Operations for the

purposes of producing Petroleum, increasing production, sustaining

production or accelerating extraction of Petroleum including

production Wells, injection Wells and dry Wells.



1.33



"Discovery" means the finding, during Exploration Operations, of a

deposit of Petroleum not previously known to have existed, which

can be recovered at the surface in a flow measurable by

conventional petroleum industry testing methods, including an

Existing Discovery and a New Discovery.

6



1.34



"Discovery Area" means that part of the Contract Area about which,

based upon Discovery and the results obtained from a Well or Wells

drilled in such part, both the Government and the Contractor are of

the opinion that Petroleum exists and is likely to be produced in

commercial quantities.



1.35



"Effective Date" means the date on which this Contract is

executed.



1.36



"Environmental Clearance" means permission granted in writing by

the Government to the Contractor to perform all activities

necessary and appropriate to conduct Petroleum Operations subject

to conditions specified with regard to protection of the

environment and minimizing Environmental Damage.



1.37



"Environmental Damage" means soil erosion, removal of vegetation,

destruction of wildlife, pollution of groundwater or surface water,

land contamination, air pollution, noise pollution, bush fire,

disruption to water supplies, to natural drainage or natural flow

of rivers or streams, damage to archaeological, palaeontological

and cultural sites and shall include any damage or injury to, or

destruction of, soil or water in their physical aspects together

with vegetation associated therewith, aquatic or terrestrial

mammals, fish, avifauna or any plant or animal life whether in the

sea or in any other water or on, in or under land provided such

damage is in violation of legislation relating to the protection of

the environment.



1.38



"Excess ANG" shall have the meaning given in Article 21.4.



1.39



"Existing Discovery" means a Discovery made by ONGC before the

Effective Date and accepted by the Parties as a Commercial

Discovery.



1.40



"Exploration Costs" means those costs and expenditures

incurred in carrying out Exploration Operations, as

classified and defined in Section 2 of the Accounting

Procedure and allowed to be recovered in terms of Section 3

thereof.



1.41



"Exploration Operations" means operations conducted in the Contract

Area pursuant to this Contract in searching for Petroleum or in the

course of an Appraisal Programme and shall include but not be

limited to aerial, geological, geophysical, geochemical,

palaeontological, palynological, topographical and seismic surveys,

analysis, studies and their interpretation, investigations relating

to the subsurface geology including structure test drilling,

stratigraphic test drilling, drilling of Exploration Wells or

Appraisal Wells and other related activities such as testing,

surveying, drill site preparation and all work necessarily

connected therewith that is conducted in connection with Petroleum

exploration.

7



1.42



"Exploration Well" means a Well drilled for the purpose of

searching for undiscovered Petroleum accumulations on any

geological entity (be it of structural, stratigraphic, facies or

pressure nature) to at least a depth or stratigraphic level

specified in the Work Programme.



1.43



"Field" means an Oil Field or a Gas Field in the Contract Area in

respect of which a Development Plan has been duly approved in

accordance with Article 9 or Article 21 hereof.



1.44



"Financial Year" means the period from the first day of April

through the thirty-first day of March of the following Calendar

Year.



1.45



"Foreign Company" means a Company within the meaning of Section 591

of the Companies Act, 1956, as amended from time to time.



1.46



"Gas" means Natural Gas.



1.47



"Gas Field" means an area within the Contract Area consisting of a

single Gas Reservoir or multiple Gas Reservoirs all grouped on or

related to the same individual geological structure or

stratigraphic conditions, designated by the Contractor and approved

by the Government or Management Committee, as the case may be, (to

include the maximum area of potential productivity in the Contract

Area in a simple geometric shape) in respect of which a Commercial

Discovery has been declared or a Development Plan has been approved

in accordance with Article 9 or Article 21 hereof.



1.48



"Investment" shall have the meaning assigned in paragraph 3

of Appendix D.



1.49



"Investment Multiple" means the ratio of accumulated Net Cash

Income to accumulated Investment in the Contract Area, earned by

the Companies, as determined in accordance with Appendix D.



1.50



"LIBOR" means the London Inter-Bank Offering Rate for six-month

deposits of United States Dollars as quoted by the London office of

the Bank of America (or such other Bank as the Parties may agree)

for the day or days in question.



1.51



"Lessee" means any person or body corporate, including the

Contractor, which holds a mining lease under the Petroleum and

Natural Gas Rules, 1959, for the purpose of carrying out Petroleum

Operations in the Contract Area and their successors and permitted

assigns.



1.52



"Management Committee" means the committee constituted

pursuant to Article 5 hereof.



1.53



"Minimum Work Obligation" means the Work Programme related

8

to those items specified in Appendix G as approved by the

Management Committee.



1.54



"Natural Gas" means wet Gas, dry Gas, all other gaseous

hydrocarbons, and all substances contained therein, including

sulphur and helium, which are produced from Oil or Gas Wells,

excluding those condensed or extracted liquid hydrocarbons that are

liquid at normal temperature and pressure conditions, and including

the residue Gas remaining after the condensation or extraction of

liquid hydrocarbons from Gas.



1.55



"Net Cash Income" shall have the meaning assigned in

paragraph 2 of Appendix D.



1.56



"New Discovery" means a Discovery made after the Effective

Date.



1.57



"Non Associated Natural Gas" or "NANG" means Natural Gas which is

produced either without association with Crude Oil or in

association with Crude Oil which by itself cannot be commercially



produced.

1.58



"Oil" means "Crude Oil".



1.59



"Oil Field" means an area within the Contract Area consisting of a

single Oil Reservoir or multiple Oil Reservoirs all grouped on or

related to the same individual geological structure, or

stratigraphic conditions, designated by the Contractor and approved

by the Government or the Management Committee, as the case may be

(to include the maximum area of potential productivity in the

Contract Area in a simple geometric shape) in respect of which a

Commercial Discovery has been declared and a Development Plan has

been approved in accordance with Article 9 hereof and a reference

to an Oil Field shall include a reference to the production of

Associated Natural Gas from that Oil Field.



1.60



"Operating Agreement" means the Joint Operating Agreement entered

into by the Parties constituting Contractor in accordance with

Article 6, with respect to the conduct of Petroleum Operations.



1.61



"Operating Committee" means the committee established by

that name in the Operating Agreement.



1.62



"Operator" means the Party so designated in Article 6.



1.63



"Participating Interest" means the percentage of participation of

the constituents of the Contractor at any given time in the rights

and obligations under this Contract. Initially the Participating

Interest of the constituents of Contractor are as follows:

9

1.

2.

3.



ONGC

RIL

EOGIL



40%

30%

30%



1.64



"Parties" means the Parties signatory to this Contract including

their successors and permitted assigns under this Contract and the

term "Party" means any of the Parties.



1.65



"Petroleum" means Crude Oil and/or Natural Gas existing in

their natural condition.



1.66



"Petroleum Operations" means, as the context may require,

Exploration Operations, Development Operations or Production

Operations or any combination of such operations, including, but

not limited to, collection of seismic information, drilling and

completion and Recompletion of Wells, construction, operation and

maintenance of all necessary facilities, plugging and abandonment

of Wells, environmental protection, transportation, storage, sale

or disposition of Petroleum to the Delivery Point, Site Restoration

and all other incidental operations or activities as may be

necessary.



1.67



"Production Costs" means those costs and expenditures incurred in

carrying out Production Operations as classified and defined in

Section 2 of the Accounting Procedure and allowed to be recovered

in terms of Section 3 thereof.



1.68



"Production Operations" means all operations conducted for the

purpose of producing Petroleum from the Contract Area after the

commencement of production from the Contract Area, including the

operation and maintenance of all necessary facilities therefor.



1.69



"Profit Petroleum" means all Petroleum produced and saved from the

Contract Area in a particular period as reduced by Cost Petroleum

and calculated as provided in Article 14.



1.70



"Recompletion" means an operation whereby a completion in one zone

is abandoned in order to attempt a completion in a different zone

within the existing wellbore.



1.71



"Reservoir" means a naturally occurring discrete

accumulation of Petroleum.



1.72



"Section" means a section of the Accounting Procedure.



1.73



"Self-Sufficiency" means, in relation to any Financial Year, that

the volume of Crude Oil and Crude Oil equivalent of Petroleum

products exported from India during that Financial Year either

equals or exceeds the volume of Crude Oil and Crude Oil equivalent

of Petroleum products imported into India during the same Financial

Year.



1.74



"Site Restoration" shall mean all activities required to

10

return a site to its state as of the Effective Date pursuant to the

Contractor's environmental impact study or to render a site

compatible with its intended after-use (to the extent reasonable)

after cessation of Petroleum Operations in relation thereto and

shall include, where appropriate, proper abandonment of Wells or

other facilities, removal of equipment and structures (whether

installed before or after the Effective Date), and debris,

establishment of compatible contours and drainage, replacement of

top soil, revegetation, slope stabilization, infilling of

excavations or any other appropriate actions in the circumstances.



1.75



"Subcontractor" means any company or person contracted by

the Operator to provide services with respect to the

Petroleum Operations.



1.76



"Well" means a borehole, made by drilling in the course of

Petroleum Operations, but does not include a seismic shot hole.



1.77



"Work Programme" means all the plans formulated for the

performance of the Petroleum Operations.



1.78



"Year" means Financial Year.

11

ARTICLE 2

DURATION



2.1



The term of this Contract shall be for a period of twentyfive (25) years from the Effective Date, unless the Contract

is terminated earlier in accordance with its terms, but may

be extended on such terms and conditions as may be mutually

agreed by the Parties hereto.

12

ARTICLE 3

RELINQUISHMENT



3.1



The Contractor may, with the approval of the Management Committee,

voluntarily relinquish a portion of the Contract Area other than an

area for which a Development Plan has been approved. Contractor

shall give the Government written notice of relinquishments thirty

(30) days prior to the end of any Calendar Year.



3.2



Relinquishment of less than all of the Contract Area shall

be in blocks of not less than one hundred square kilometres

(100 sq. kms.) and be of such shape and location as the

Government may deem appropriate for enabling effective

exploration and exploitation of such area.



3.3



Relinquishment of all or a part of the Contract Area or termination

of the Contract shall not be construed as absolving the Contractor

of any liability undertaken or incurred by the Contractor in

respect of the Contract Area prior to the date of such

relinquishment or termination.

13

ARTICLE 4

WORK PROGRAMME



4.1



The Contractor shall commence Petroleum Operations not later than

six (6) months from the Effective Date.



4.2



As soon as possible after the Effective Date, in respect of the

period ending with the last day of the Financial Year in which the

Effective Date falls and thereafter ninety (90) days before

commencement of each following Financial Year, the Contractor shall

submit to the Management Committee, through the Operating

Committee, the Work Programmes and budgets relating to Petroleum

Operations, including the Minimum Work Obligations, to be carried

out during the ensuing Financial Year.



4.3



The Contractor may propose amendments to the details of an approved

Work Programme and budget in the light of the then existing

circumstances and shall submit to the Management Committee, through

the Operating Committee, modifications or revisions to the Work

Programme and budgets.

14

ARTICLE 5

MANAGEMENT COMMITTEE



5.1



For the purpose of proper and expeditious performance of

Petroleum Operations under the provisions of this Contract,

there shall be constituted a committee to be called the

Management Committee.



5.2



The Management Committee shall consist of four (4) members, one (1)

member nominated by and representing Government and one (1) member

nominated by and representing each constituent of the Contractor.

The member nominated by ONGC shall act as chairman.



5.3



A representative of the Operator acting as the convenor

shall call the meetings of the Management Committee.



5.4



Government and the Contractor may nominate alternate members with

full authority to act in the absence and on behalf of the members

nominated under Article 5.2 and may, at any time, nominate another

member or alternate member to replace any member nominated earlier

by notice to other members of the Management Committee.



5.5



A quorum of the Management Committee shall consist of three

(3) members.



5.6



The following matters shall be submitted to the Management

Committee for approval:

(a)



annual Work Programmes and budgets and any modifications

or revisions thereto, as proposed by the Operating

Committee, for Exploration Operations, Development

Operations and/or Production Operations;



(b)



proposals for an Appraisal Programme, the declaration of a

New Discovery as a Commercial Discovery and the approval

of Development Plans as may be required under this

Contract, or revisions or additions to an Appraisal

Programme or a Development Plan;



(c)



delineation of a Field and a Development Area;



(d)



appointment of auditors;



(e)



collaboration with lessees or contractors of other

areas;



(f)



claims or settlement of claims for or on behalf of or

against the Contractor in excess of limits specified in

the Operating Agreement or fixed by the Management

Committee from time to time;



(g)



any proposed mortgage, charge or encumbrance on

petroleum assets, petroleum reserves or production of

15

Petroleum;



(h)



any other matter required by the terms of this Contract



to be submitted for the approval of the Management

Committee;

(i)



any other matter which the Contractor or the Operating

Committee decides to submit to it.



5.7



The Management Committee shall not take any decision without

obtaining prior approval of the Government, where such

approval is required under this Contract.



5.8



The Management Committee shall meet at least once every three (3)

months or more frequently at the request of any member. Operator

shall convene each meeting by notifying the members at least twenty

eight (28) days prior to such meeting (or a shorter period of

notice if the members unanimously so agree) of the time and place

of such meeting and the purpose thereof and shall include in such

notice a provisional agenda for such meeting. The Operator shall be

responsible for processing the final agenda for such meeting and

the agenda shall include all items of business requested by the

members to be included, provided such requests are received by the

Operator at least ten (10) days prior to the date fixed for the

meeting. The Operator shall forward the agenda to the members at

least nine (9) days prior to the date fixed for the meeting.

Matters not included in the agenda may be taken up at the meeting

by any member with the unanimous consent of all the members.



5.9



The Chairman, and in his absence any other member nominated by

ONGC, shall preside over the meetings of the Management Committee.



5.10



The Operator shall appoint one of the members nominated by the

constituents of the Contractor as secretary to the Management

Committee with responsibility, inter alia, for preparation of the

minutes of every meeting in the English language and provision to

every member of the Management Committee with two (2) copies of the

minutes not later than twenty-eight (28) days after the date of the

meeting.



5.11



Within twenty-one (21) days of the receipt of the minutes of a

meeting, members shall notify the Operator and the other members of

their approval of the minutes by putting their signatures on one

copy of the minutes and returning the same to the Operator or by

indicating such approval to the Operator by telex, cable, or

facsimile, with copies to the other members. Any member may suggest

any modification, amendment or addition to the minutes by telex,

cable or facsimile to the Operator and other members or by

indicating such suggestions when returning the copy of the minutes

to the Operator. If the Operator or any other member does not agree

with the modification, amendment or addition to the

16

minutes suggested by any member, the matter shall be brought to the

attention of the other members and resubmitted to the Management

Committee for approval at the next meeting and the minutes shall

stand approved as to all other matters. If a member fails to

appropriately respond within the aforesaid twenty-one (21) day

period as herein provided, the minutes shall be deemed approved by

such member.



5.12



The meetings of the Management Committee shall be held in New

Delhi, India unless otherwise mutually agreed by the members of the

Management Committee.



5.13



All matters requiring the approval of the Management Committee

shall be approved by a vote of three (3) or more members of the

Management Committee one (1) of whom shall be the Government

representative.

17

ARTICLE 6

OPERATORSHIP AND OPERATING AGREEMENT



6.1



EOGIL shall be the Operator for purposes of this Contract.



6.2



No change in operatorship shall be effected without the consent of



the Government, which consent shall not be unreasonably withheld.

6.3



The operating functions required of the Contractor under this

Contract shall be performed by the Operator on behalf of all

constituents of the Contractor subject to, and in accordance with,

the terms and provisions of this Contract, and generally accepted

international petroleum industry practice.



6.4



The constituents of the Contractor shall execute a mutually

agreed Operating Agreement. The Agreement shall be

consistent with the provisions of this Contract and shall

provide for, among other things:

(a)



the appointment, resignation, removal and

responsibilities of the Operator;



(b)



the establishment of an Operating Committee;



(c)



functions of the Operating Committee taking into

account the provisions of the Contract, procedures for

decision making, frequency and place of meetings; and



(d)



contribution to costs, default, sole risk, disposal of

petroleum and assignment as between the parties to the

Operating Agreement.

18

ARTICLE 7

GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES



7.1



Subject to the provisions of this Contract, the Contractor

shall have, but not be limited to, the following rights:

(a)



the exclusive right during the term hereof to carry out

Petroleum Operations in the Contract Area and to

recover costs and expenses as provided in this

Contract;



(b)



the right to use, free of charge, such quantities of

Petroleum produced from any Field as are reasonably

required for conducting Petroleum Operations in the

Contract Area in accordance with generally accepted

practices in the international petroleum industry;



(c)



the right to lay, build, construct or install

pipelines, roads, bridges, ferries, aerodromes,

landing fields, radio telephones, satellite

communications and related communication and

infrastructure facilities and exercise other ancillary

rights as may be reasonably necessary for the conduct

of Petroleum Operations subject to such approvals as

may be required, which shall not be unreasonably

withheld, under the applicable laws and/or regulations

in force from time to time for the regulation and

control thereof;



(d)



the right to have an expatriate work force as required

and necessary together with their required personal

effects;



(e)



the right to flare Gas temporarily when and as necessary,

provided the Operator shall give notice thereof to the

Government within forty-eight (48) hours of the start of

such flaring and the issue shall be discussed in the next

meeting of the Management Committee;



(f)



the right to use all wells, equipment and facilities

installed as of the Effective Date in the Contract Area

("Assets") free of any additional cost or charges or

encumbrances and assignment of such Assets to Operator on

behalf of the Contractor;



(g)



such other rights as are specified in this Contract.



7.2



The Government reserves the right to itself, or to grant to the

Lessee or others, the right to prospect for and mine minerals or

substances other than Petroleum within the Contract Area; provided,

however, that if after the Effective Date, the Lessee or others are

issued rights, or the Government proceeds directly to prospect for

and mine in the Contract Area for any minerals or substances other

than

19

Petroleum, the Contractor shall use reasonable efforts to avoid

obstruction to or interference with such operations within the

Contract Area and, in either case, the Government shall use

reasonable efforts to ensure that operations carried out do not

obstruct or unduly interfere with Petroleum Operations in the

Contract Area. In the event of any conflict, Petroleum Operations

shall take preference.



7.3



The Contractor shall:

(a)



except as otherwise expressly provided in this Contract,

conduct all Petroleum Operations at its sole risk, cost

and expense and provide all funds necessary for the

conduct of Petroleum Operations including funds for the

purchase or lease of equipment, materials or supplies

required for Petroleum Operations as well as for making

payments to employees and Subcontractors;



(b)



conduct all Petroleum Operations within the Contract Area

diligently, expeditiously, efficiently and in a safe and

workmanlike manner in accordance with good international

petroleum industry practice pursuant to the approved Work

Programmes;



(c)



ensure provision of all information, data, samples etc.

which the Contractor may be required to furnish under

the applicable laws;



(d)



ensure that all equipment, materials, supplies, plant and

installations used for Petroleum Operations comply with

generally accepted standards in the international

petroleum industry and are of proper construction and kept

in good working order;



(e)



in the preparation and implementation of Work Programmes

and in the conduct of Petroleum Operations, follow good

international petroleum industry practices with such

degree of diligence and prudence reasonably and ordinarily

exercised by experienced parties engaged in a similar

activity under similar circumstances and conditions;



(f)



after the designation of a Field and a Development Area,

pursuant to this Contract, forthwith proceed to take all

necessary action for prompt and orderly development of the

Field and the Development Area and for the production of

Petroleum in accordance with the terms of this Contract;



(g)



appoint a technically competent and sufficiently

experienced representative, and, in his absence, a

suitably qualified replacement therefor, who shall be

resident in India and who shall have full authority to

take such steps as may be necessary to implement this

Contract and whose names shall, on appointment within

20

ninety (90) days after commencement of the first

Contract Year, be made known to the Government;



(h)



provide acceptable working conditions, living

accommodation and access to medical attention and nursing

care in the Contract Area for all personnel employed in

Petroleum Operations and extend these benefits to other

persons who are engaged in or assisting in the conduct of

Petroleum Operations in the Contract Area;



(i)

7.4



be always mindful of the rights and interests of India

in the conduct of Petroleum Operations;



The infrastructure such as pipelines as may be

developed/established by the Contractor within the country may, to

the extent capacity is available, be available to the Government or

any other entity upon payment of compensation which shall include,

but not be limited to, cost of operation, repair, maintenance,

interest and profit. The Government and any other entity using any

of Contractor's facilities shall indemnify and hold harmless

Contractor from and against any and all loss, damage or injury

arising out of or connected with such use.

21

ARTICLE 8

GOVERNMENT ASSISTANCE



8.1



Upon application in the prescribed manner, and subject to

compliance with applicable laws and relevant procedures, the

Government will without any cost to itself:

(a)

(b)



(c)

(d)



(e)



provide the right of ingress and egress from the Contract

Area and any facilities used in Petroleum Operations,

wherever located, and which may be within their control;

use their good offices, when necessary, to assist

Contractor in procurement of facilities and services

required for execution of Petroleum Operations

including necessary approvals, permits, consents,

authorisations, visas, work permits, licenses, rights

of way, easement, surface rights and security

protection, required pursuant to this Contract and

which may be available from resources within the

Government's control;

use their good offices to assist in identifying and

making available necessary priorities for obtaining

local goods and services;

in the event that onshore facilities are required

outside the Contract Area for Petroleum Operations

including, but not limited to, storage, loading and

processing facilities, pipelines and offices, use their

good offices in assisting the Contractor to obtain from

the authorities of the state government in the state in

which such facilities are required, such licenses,

permits, authorizations, consents, security protection,

surface rights and easements as are required for the

construction and operation of the said facilities by

the Contractor;

in the event there is no economical passage other than

through national parks, sanctuaries, mangroves, wetlands

of national importance, biosphere reserves or other

biologically sensitive areas, assist in obtaining the

prior written permission of the concerned authorities.



8.2



ONGC shall provide data, if any, related to the Contract

Area to the Contractor which has not been previously

provided.



8.3



Environmental Clearance(s), if any, at the Effective Date shall be

assigned to EOGIL without obligation to remediate or correct any

prior commission of omission by ONGC, but obligations, after the

Effective Date, shall be binding on Contractor.

22

ARTICLE 9

DISCOVERY, DEVELOPMENT AND PRODUCTION



9.1



If and when a New Discovery is made within the Contract

Area, the Contractor shall:

(a)



forthwith inform the Government of the Discovery;



(b)



promptly thereafter, but in no event later than a period

of thirty (30) days from the date of such Discovery,



furnish to the Government particulars, in writing, of the

Discovery;

(c)



9.2



9.3



promptly run tests to determine whether the New

Discovery is of potential commercial interest and,

within a period of sixty (60) days after completion of

such tests and analysis of results, submit a report to

the Management Committee and the Government containing

data obtained from such tests and its analysis and

interpretation thereof, together with a written

notification to the Government of whether, in the

Contractor's opinion, such New Discovery is of

potential commercial interest and merits appraisal.



If, pursuant to Article 9.1(c), the Contractor notifies the

Government that a New Discovery is of potential commercial

interest, the Contractor shall prepare and submit to the Management

Committee, within one hundred and twenty (120) days of such

notification, a proposed Appraisal Programme with a Work Programme

and budget to carry out an adequate and effective appraisal of such

New Discovery designed to achieve both the following objectives:

(a)



determine without delay, and, in any event, within the

period specified in Article 9.5, whether such New

Discovery is a Commercial Discovery; and



(b)



determine, with reasonable precision, the boundaries of

the area to be delineated as a Field.



The proposed Appraisal Programme for a New Discovery shall be

considered by the Management Committee within forty-five (45) days

after submission thereof pursuant to Article 9.2. The Appraisal

Programme, together with the Work Programme and budget submitted by

the Contractor, revised in accordance with any agreed amendments or

additions thereto, approved by the Management Committee, shall be

adopted as the Appraisal Programme and the Contractor shall

promptly commence implementation thereof; and the Yearly budget

adopted pursuant to Article 4, shall be revised accordingly. Where,

in the case of an Existing Discovery, Contractor desires to carry

out additional appraisal work, the Contractor shall submit its

proposed Appraisal Programme in respect of the Existing Discovery

with a Work Programme and budget to the Management Committee for

its approval within

23

one hundred twenty (120) days of the Effective Date.



9.4



The Contractor shall, unless otherwise agreed, in respect of a New

Discovery of Crude Oil, advise the Management Committee, by notice

in writing within a period of twenty-four (24) months from the date

on which the notice provided for in Article 9.1 was delivered,

whether such New Discovery is a Commercial Discovery or not. Such

notice shall be accompanied by a report on the New Discovery

setting forth all relevant technical and economic data as well as

all evaluations, interpretations and analysis of such data and

feasibility studies relating to the New Discovery prepared by or

for the Contractor, with respect to the Discovery. If the

Contractor is of the opinion that Petroleum has been discovered in

commercial quantities, it shall propose that the Government or

Management Committee, as the case may be, declare the New Discovery

as a Commercial Discovery based on the report submitted. In respect

of a New Discovery of Gas, the provisions of Article 21 shall

apply.



9.5



The Management Committee shall, within forty-five (45) days of the

date of the notice referred to in Article 9.4, consider the

proposal of the Contractor and request any other additional

information it may reasonably require so as to reach a decision on

whether or not to declare the New Discovery as a Commercial

Discovery. Such decision shall be made within the later of (a)

ninety (90) days from the date of notice referred to in Article 9.4

or (b) ninety (90) days of receipt of such other information as may

be reasonably required under this Article 9.5. In the case of an

Existing Discovery, Contractor shall within ninety (90) days of the



Effective Date propose a Development Plan following the plan

brought out in Appendix G, intended to achieve the production

profile brought out in Appendix H, containing the detailed

information required in Article 9.6, with supporting budget. Where

a Development Plan is so agreed it shall be the approved

Development Plan pursuant to Article 9 hereof.

9.6



If a New Discovery is declared commercial the Contractor shall

submit to the Management Committee, a comprehensive plan for the

development of the Commercial Discovery within two hundred (200)

days of the declaration of the Discovery as a Commercial Discovery.

Such plan shall contain detailed proposals by the Contractor for

the construction, establishment and operation of all facilities and

services for and incidental to the recovery, storage and

transportation of the Petroleum from the proposed Development Area

to the Delivery Point together with all data and supporting

information including but not limited to:

(a)



Description of the nature and characteristics of the

24

Reservoir, data, statistics, interpretations, and

conclusions on all aspects of the geology, reservoir

evaluation, petroleum engineering factors, reservoir

models, estimates of reserves in place, possible

production magnitude, nature and ratio of Petroleum fluids

and analysis of producible Petroleum;



9.7



(b)



Outlines of the development project and/or alternative

development projects, if any, describing the production

facilities to be installed and the number of wells to be

drilled under such development project and/or alternative

development projects, if any;



(c)



Estimate of the rate of production to be established

and projection of the possible sustained rate of

production in accordance with generally accepted

international petroleum industry practice under such

development project and/or alternative development

project, if any, which will ensure that the area does

not suffer an excessive rate of decline of production

or an excessive loss of reservoir pressure;



(d)



estimates of Development Costs and Production Costs

under such development project and/or alternative

development projects, if any;



(e)



Contractor's recommendations as to the particular

project that it would prefer, if any;



(f)



Work Programme and budget for Development and

Production Operations;



(g)



anticipated adverse impact on the environment and

measures to be taken for prevention or minimization

thereof and for general protection of the environment

in conduct of operations; and



(h)



production profiles, financial / commercial analysis of

the project proposal.



Any proposed Development Plan submitted by the Contractor pursuant

to Articles 9.5 and/or 9.6 will be approved by the Management

Committee with such amendments and modifications as may be agreed

upon by the Contractor, within seventy-five (75) days of submission

of the Development Plan, which approval shall not be unreasonably

withheld. If such a Development Plan has not been approved by the

Management Committee within the seventy-five (75) day period, the

Contractor shall have the right to submit such plan directly to the

Government for approval, which approval shall not be unreasonably

withheld. The submission will be answered within sixty (60) days of

receipt.



9.8



The Management Committee shall obtain such approvals from

25

the Government as may be required, except where this Contract

provides that the Contractor may obtain such approvals directly.



9.9



If the Management Committee fails to declare a New Discovery of Oil

to be commercial while the Contractor consider that it is

commercial or the Management Committee fails to declare the New

Discovery as a Commercial Discovery within the time limit

stipulated in Article 9.5 hereof, the Contractor may declare the

New Discovery as a Commercial Discovery and submit development and

production plans in respect of the Discovery to the Management

Committee as per the provisions of Article 9.6 and after such plans

have been approved by the Management Committee, the Contractor

shall, acting solely, provide the entire Development Costs and

undertake development of the Oil Field. If, however, the Field

turns out to be non-commercial, the entire Development Cost of the

Field shall be borne solely by the Contractor and shall not be

recoverable as Cost Petroleum from any other Field or Contract Area

but shall be recoverable solely from such Field.



9.10



In the event that the Government considers a New Discovery to be

commercial but the Contractor considers the same as non-commercial,

the Government shall give notice to the Contractor to that effect

and thereafter the Field relating to such New Discovery shall be

excluded from the Contract Area for all purposes. In this event,

the Contractor shall have no claim on the production from such

Field.



9.11



Work Programmes and budgets for Development and Production

Operations shall be submitted to the Management Committee, as soon

as possible after the designation of a Development Area and

thereafter not later than 31st December each Calendar Year in

respect of the Financial Year immediately following.



9.12



The Management Committee, when considering any Work Programme and

budget, may require the Contractor to prepare an estimate of

potential production to be achieved through the implementation of

the programme and budget for each of the three (3) Financial Years

following the Financial Year to which the Work Programme and budget

relate. If major changes in Financial Year to Financial Year

estimates of potential production are required, these shall be

based on concrete evidence necessitating such changes.



9.13



Not later than the fifteenth (15) day of January each Calendar

Year, in respect of the Financial Year immediately following, the

Contractor shall determine the "Programme Quantity". The Programme

Quantity for any Financial Year shall be the maximum quantity of

Petroleum based on Contractor's estimates, as approved by the

Management Committee, which can be produced from a Field consistent

with sound international petroleum industry practices and

26

minimizing unit production cost, taking into account the capacity

of the producing Wells, gathering lines, separators, storage

capacity and other production facilities available for use during

the relevant Financial Year, as well as the transportation

facilities up to the Delivery Point.



9.14



Proposed revisions to the details of a Development Plan or an

annual Work Programme or budget in respect of Development and

Production Operations shall, for good cause and if the

circumstances so justify, be submitted to the Management Committee

for approval, through the Operating Committee.

27

ARTICLE 10

UNIT DEVELOPMENT



10.1



If a Reservoir in a New Discovery Area is situated partly within



the Contract Area and partly in an area in India over which other

parties have a contract or license/lease to conduct Petroleum

Operations, the Government may, for securing the most effective

recovery of Petroleum from such Reservoir, by notice in writing to

the Contractor, require that the Contractor:

(a)



collaborate and agree with such other parties on the

joint development of the Reservoir;



(b)



submit such agreement between the Contractor and such

other parties to the Government for approval; and



(c)



prepare a plan for such joint development of the

Reservoir, within one hundred and eighty (180) days of the

approval of the agreement referred to in (b) above.



10.2



If no plan is submitted within the period specified in Article

10.1(c) or such longer period as the Contractor and other parties

may agree or, if such plan as submitted is not acceptable to the

Government and the parties cannot agree on amendments to the

proposed joint development plan, the Government may cause to be

prepared, at the expense of the Contractor and the other parties

referred to in Article 10.1, a plan for such joint development

consistent with generally accepted practices in the international

petroleum industry which shall take into consideration any plans

and presentations made by the Contractor and the aforementioned

other parties.



10.3



If the Parties are unable to agree on the plan for joint

development, then any of them may refer the matter to a sole expert

for final determination pursuant to Article 33, provided that the

Contractor may in case of any disagreement on the issue of joint

development or the proposed joint development plan, or within sixty

(60) days of determination by a sole expert, notify the Management

Committee that it elects to surrender its rights in the New

Discovery Area in lieu of participation in a joint development.



10.4



If a proposed joint development plan is agreed and adopted by the

parties, or adopted following determination by the sole expert, the

plan as finally adopted shall be the approved joint development

plan and the Contractor shall comply with the terms of the

Development Plan as if the Commercial Discovery is established.



10.5



The provisions of Articles 10.1, 10.2, 10.3 and 10.4 shall apply

MUTATIS MUTANDIS to a New Discovery of a Reservoir located partly

within the Contract Area, which, although not equivalent to a

Commercial Discovery if developed alone,

28

would be a Commercial Discovery if developed together with that

part of the Reservoir which extends outside the Contract Area to

areas subject to contract or given on license/lease for Petroleum

Operations by other parties.



10.6



If a New Discovery is situated partly within the Contract Area and

partly outside the Contract Area, the area outside the Contract

Area over which, at the time of the making of the New Discovery by

the Contractor, no production sharing contract similar to this

Contract has been granted or is under negotiation and/or no

license/lease to conduct petroleum operations has been granted, the

Government will favourably consider the extension of the Contract

Area to include the entire area of the Reservoir if so requested by

the Contractor.

29

ARTICLE 11

MEASUREMENT OF PETROLEUM



11.1



The volume and quality of Petroleum produced and saved from a Field

shall be measured by methods and appliances generally accepted and

customarily used in generally accepted international petroleum

industry practice.



11.2



The Government may, at all reasonable times, inspect and test the



appliances used for measuring the volume and determining the

quality of Petroleum, provided that any such inspection or testing

shall be carried out in such a manner so as not to unduly interfere

with Petroleum Operations.

11.3



Before commencement of production in a Field, except for the

Fields which are producing as of the Effective Date, the

Parties shall mutually agree on:

(a)



methods to be employed to optimize the measurement of

volumes of Petroleum;



(b)



the point at which Petroleum shall be measured and the

respective shares allocated to the Parties in

accordance with the terms of this Contract;



(c)



the frequency of inspections and testing of measurement

appliances and relevant procedures relating thereto;

and



(d)



the consequences of a determination of an error in

measurement.



In the case of existing Fields, this Article 11.3 shall be given

force as soon as practicable after the Effective Date, but in any

case, not later than one hundred eighty (180) days after the

Effective Date.

11.4



The Contractor shall undertake to measure the volume and quality of

the Petroleum produced and saved from a Field at the agreed

measurement point consistent with generally accepted practices in

the international petroleum industry. The Contractor shall not make

any alteration in the agreed method or procedures for measurement

or to any of the approved appliances used for the purpose without

the written consent of the Government.



11.5



The Contractor shall give the Government timely notice of its

intention to conduct calibration operations or any agreed

alteration for such operations and the Government shall have the

right to be present and observe, either directly or through

authorized representatives, such operations.

30

ARTICLE 12

PROTECTION OF THE ENVIRONMENT



12.1



12.2



The Government and the Contractor recognise that Petroleum

Operations will cause some impact on the environment in the

Contract Area. Accordingly, in performance of the Contract, the

Contractor shall conduct its Petroleum Operations with due regard

to concerns with respect to protection of the environment and

conservation of natural resources. In the furtherance of any laws,

regulations and rules promulgated by the Government, the Contractor

shall:

(a)



employ generally accepted industrial standards, including

as required, advanced techniques, practices and methods of

operation for the prevention of Environmental Damage in

conducting its Petroleum

Operations;



(b)



take necessary and adequate steps to prevent Environmental

Damage and, where some adverse impact on the environment

is unavoidable, to minimize such damage and the

consequential effects thereof on property and people; and



(c)



adhere to the guidelines, limitations or restrictions, if

any, imposed by Environmental Clearance as applicable on

the Effective Date and as such Environmental Clearance may

be revised, expanded or replaced as a result of

Contractor's application(s) duly submitted after the

Effective Date.



If the Contractor fails to substantially comply with the provisions



of Article 12.1 or materially contravenes any relevant law, and

such failure or contravention results in substantial Environmental

Damage, the Contractor shall forthwith take all necessary and

reasonable measures to remedy the failure and the effects thereof.

12.3



If the Government has, on reasonable grounds, reason to believe

that any works or installations erected by the Contractor or any

operations conducted by the Contractor are endangering or may

endanger persons or any property of any person, or are causing

avoidable pollution, or are harming fauna and flora or the

environment to a degree which is unlawful, the Government may,

pursuant to applicable law, require the Contractor to take remedial

measures within such reasonable period as may be determined by the

Government and, if appropriate, repair such damage. The Government

may, pursuant to applicable law, require the Contractor to

discontinue Petroleum Operations in whole or in part until the

Contractor has taken such action.



12.4



The Contractor shall, within one hundred twenty (120) days of the

Effective Date, cause a person or persons with special knowledge on

environmental matters, approved by the

31

Government, to carry out an environmental impact study in order:



12.5



12.6



(a)



to determine, at the time of the study, the prevailing

situation relating to the environment, human beings and

local communities, the wildlife and marine life in the

Contract Area and in the adjoining or neighbouring areas;

and



(b)



to establish the likely effect on the environment, human

beings and local communities, the wildlife and marine life

in the Contract Area and in the adjoining or neighbouring

areas in consequence of the relevant phase of Petroleum

Operations to be conducted under this Contract.



The Contractor shall ensure that:

(a)



Petroleum Operations are conducted in an environmentally

acceptable and safe manner consistent with good

international petroleum industry practice and that such

Petroleum Operations are properly monitored;



(b)



the pertinent completed environmental impact studies are

made available to its employees and to its Subcontractors

to develop adequate and proper awareness of the measures

and methods of environmental protection to be used in

carrying out the Petroleum Operations; and



(c)



the contracts entered into between the Contractor and its

Subcontractors relating to its Petroleum Operations shall

include the provisions stipulated herein and any

established measures and methods for the implementation of

the Contractor's obligations in relation to the

environment under this Contract.



The Contractor shall, prior to conducting any drilling activities,

prepare and submit for review by the Government contingency plans

for dealing with oil spills, fires, accidents and emergencies,

designed to achieve rapid and effective emergency response. The

plans referred to above shall be discussed with the Government and

concerns expressed shall be taken into account.

12.6.1



In the event of an emergency, accident, oil spill

or fire arising from Petroleum Operations

affecting the environment, the Contractor shall

forthwith notify the Government and shall

promptly implement the relevant contingency plan

and perform such Site Restoration as may be

necessary.



12.6.2



In the event of any other emergency or accident

arising from the Petroleum Operations affecting



32

the environment, the Contractor shall take such

action as may be prudent and necessary in

accordance with good international petroleum

industry practice in such circumstances.

12.7



In the event that the Contractor fails to take necessary action to

comply with any of the terms contained in Article 12.5 and Article

12.6 within a reasonable period specified by the Government, the

Government, after giving the Contractor reasonable notice in the

circumstances, may take any action which may be necessary to ensure

compliance with such terms and recover from the Contractor,

immediately after having taken such action, all costs and

expenditures incurred in connection with such action together with

such interest as may be determined in accordance with Section 1.7

of Appendix C of this Contract.



12.8



Contractor shall notify the Government upon determination by it

that the estimated remaining recoverable reserves of any Field net

of operating costs equal two and one-half (2 1/2) times the

estimated abandonment cost whereupon the Government shall, within

sixty (60) days, take control of the Field and the abandonment

obligation or, failing which, the Contractor may then proceed to

recover the abandonment cost from the remaining production and

abandon such Field.



12.9



Any and all costs incurred by Contractor pursuant to this Article

shall be cost recoverable including, but not limited to, sinking

funds established for abandonment.



12.10



The responsibility of the Contractor for the environment

hereunder shall be limited to damage to the environment

which:

(a)



occurs after the date of the environmental impact

assessment ("EIA") made to establish the benchmark

condition. The EIA will be conducted as soon after the

Effective Date as is reasonably possible;



(b)



results from an act or omission of Contractor in

violation of existing law; and



(c)



notwithstanding the above, Contractor shall be responsible

for any damage to the environment because of any evidence

of Oil spill, blow-out, fire, etc., during the course of

Joint Operations from the Effective Date.

33

ARTICLE 13

RECOVERY OF COSTS



13.1



The Contractor shall be entitled to recover Contract Costs

out of the total volume of Petroleum produced and saved from

the Contract Area in each Financial Year in accordance with

the provisions of this Article, and, in respect of sole risk

or exclusive operations, Article VII of the Operating

Agreement.

13.1.1



Development Costs incurred by the Contractor in

the Contract Area shall be aggregated, and the

Contractor shall be entitled to recover out of

Cost Petroleum the aggregate of such Development

Costs at the rate of one hundred percent (100%)

per annum, provided, however, that, subject to the

remaining provisions of this Article 13.1, the

Contractor shall not, for the purposes only of

determining the volume of Petroleum to which

Contractor shall be entitled under Article 13.1 as

Cost Petroleum, claim as Contract Costs

Contractor's Development Costs incurred after the

Effective Date in connection with Development

Operations under the Development Plan for Panna



and Mukta Fields (as those Fields are determined

in the Development Plan first approved by the

Management Committee) which exceed Contractor's

Cost Recovery Limit (as hereinafter defined).

13.1.2



For the purposes of this Article 13.1,

Contractor's "Cost Recovery Limit" means costs

incurred after the Effective Date relating to the

construction and/or establishment of such

facilities as are necessary to produce, process,

store and transport Petroleum from within the

Existing Discoveries, in order to enable Oil

production of thirty-eight thousand three hundred

barrels per day (38,300 BOPD) in accordance with

the Development Plan for the Panna and Mukta

Fields. Such costs shall include costs incurred

in relation to those items illustrated in

Appendix G and matters in connection therewith.

Appendix G, Annex G-1, further describes

Companies' development concept based on an

assumed project start date of 1st July, 1993, and

Parties understand and agree that the schedules

and activities contained in such assessment shall

be revised, subject to Management Committee

approval, by the Contractor in Contractor's

Development Plan first submitted pursuant to this

Contract.

The Parties agree that for the purposes of this

Article 13.1 the Contractor's Cost Recovery Limit

shall be the sum of Five Hundred Seventy-seven

Million Five Hundred Thousand U.S. Dollars

(US$577,500,000).

34



13.1.3



The Parties acknowledge that the amount

representing Contractor's Cost Recovery Limit has

been agreed by Contractor on the basis of the

following assumptions and/or factors and/or

information:

(a)



Included in calculations for the Cost

Recovery Limit are costs relating to Gas

compression offshore required for

delivering Gas into ONGC's pipeline;

excluded from the Cost Recovery Limit are

Site Restoration and exploration or

appraisal drilling;



(b)



the Cost Recovery Limit does not include

any costs for the development of any

satellite Fields;



(c)



the Contractor being able to obtain all

necessary approvals (including Government

and state government approvals) to enable

Contractor to carry out the Development

Operations contemplated by the Development

Plan for the Panna and Mukta Fields in

accordance with the timing set out in such

plan;



(d)



the data relating to the Contract Area

provided by ONGC from time to time prior to

the Effective Date inclusive of the data

package pertaining to the Contract Area

prepared by ONGC and made available for

inspection and purchase by the Companies

pursuant to the Government's "Notice

Inviting Offers for Joint Ventures to

Develop Medium- Sized Oil and Gas Field in

India, 1992";



(e)



international market conditions relating to



the availability and cost of materials and

services in the international petroleum

industry in constant 1993 United States

Dollars;

(f)



the range of physical reservoir

characteristics in respect of the Oil and

Gas Fields comprising the Existing

Discoveries not being materially different

from the ranges for such characteristics as

revealed in the data referred to in Article

13.1.3(d) on which Companies based their

assessment as described in Annex G-1 to

Appendix G;



(g)



with regard to onshore facilities not

included in the Cost Recovery Limit as per

Articles 13.1.3(a) and 13.1.4(a), ONGC and

Companies will determine a fee,terms and

35

conditions for the referenced facilities,

which fee shall be determined by an

internationally recognized expert in the

field, who shall be selected by two members

of the Operating Committee from a group of

three internationally recognized experts

selected by ONGC and the cost of the

facilities shall be cost recoverable and

not subject to the Cost Recovery Limit; and



(h)



13.1.4



no capital investment of a material nature

is required on the Equipment contained in

Appendix F.



Having regard, inter alia, to the matters

referred to in Article 13.1.3, the Parties agree

as follows:

(a)



Included in calculations for the Cost

Recovery Limit are costs relating to Gas

compression offshore required for

delivering Gas into ONGC's pipeline system;

excluded from the Cost Recovery Limit are

water injection; Site Restoration and

exploration or appraisal drilling and

capital investment, if any, of a material

nature, on the Equipment contained in

Exhibit F shall not be subject to the Cost

Recovery Limit;



(b)



the costs of developing the reserves and/or

potential reserves and/or satellite Fields

referred to in Article 13.1.3(b) shall not

be subject to the Cost Recovery Limit,

notwithstanding that the development,

within the Contract Area, of such reserves

and/or potential reserves and/or satellite

Fields may include shared flowlines,

injection lines, Gas-lift lines and other

facilities with those constructed as part

of the Development Plan for the Panna and

Mukta Fields;



(c)



in the event that the Contractor's Cost

Recovery Limit is exceeded as a result of:

(i)



delays in carrying out the

Development Operations referred

to in Article 13.1.3(c) due to a

delay in obtaining any necessary

approval;



(ii)



material changes to the

Development Plan for the Panna

and Mukta Fields



36

necessitated by Contractor's

review of data provided, if any,

to the Companies by the

Government and/or ONGC after the

Effective Date where the

Companies are able to establish

that had such data been available

prior to the Effective Date then

the Companies, acting reasonably,

would have included such changes

in the Development Plan for the

Panna and Mukta Fields;

(iii)



a material change to the

international market conditions

referred to in Article 13.1.3(e);



(iv)



a variation to the Development

Plan for the Panna and Mukta

Fields approved by the Management

Committee; or



(v)



an event of force majeure as

provided in Article 31;



(vi)



capital investments of a material

nature, reasonably required as at

the Effective Date on the

Equipment shown in Appendix F;



then the Management Committee shall, at the

request of the Operator, in a meeting

convened under Article 5.8, promptly

consider what, if any, increase should be

made to the Contractor's Cost Recovery

Limit to fairly reflect the circumstances

in question PROVIDED THAT in the case of

delays referred to in Article 13.1.3(c) the

Management Committee shall not be obligated

to consider any increase where, and to the

extent that, such delay has been caused by

the Companies' failure to act in a diligent

manner.

13.1.5



In the event that:

(a)



there is any dispute between the Parties

whether or to what extent a circumstance

referred to in Article 13.1.4(c) has arisen

or resulted in the Contractor's Cost

Recovery Limit being exceeded; or



(b)



the Management Committee is unable to agree

whether an increase should be made to the

Contractor's Cost Recovery Limit or is

unable to agree on the amount of any such

increase;

37



then, at any time after thirty (30) days from the

date of the Management Committee meeting referred

to in Article 13.1.4(c), any Party shall be at

liberty to refer the matter to arbitration in

accordance with the provisions of Article 33.

13.1.6



Costs incurred by the Companies prior to the



Effective Date hereof which have been approved by

the Government, in writing, shall be cost

recoverable for purposes hereof after approval of

the Management Committee.

13.2



Exploration Costs (if any) incurred by the Contractor in respect of

the Contract Area up to the date of Commercial Production of

Petroleum from the Contract Area shall be aggregated, and the

Contractor shall be entitled to recover the aggregate of such

Exploration Costs out of the Cost Petroleum from the Contract Area

at the rate of one hundred percent (100%) per annum of such

Exploration Costs beginning from the date of such Commercial

Production.



13.3



The Contractor shall be entitled to recover out of the Cost

Petroleum from the Contract Area the Exploration Costs which it has

incurred in that Contract Area in any Financial Year after the date

of Commercial Production from the Contract Area at the rate of one

hundred percent (100%) per annum of such Exploration Costs

beginning from the date such Exploration Costs are incurred.



13.4



The Contractor shall be entitled to recover Exploration Costs as

provided in Articles 13.2 and 13.3 in relation to the values of the

quantity of Petroleum produced, saved and sold from the Contract

Area, in the relevant year, provided that such Exploration Costs

once recovered shall not be allowable for recovery against any

other contract area.



13.5



Development Costs incurred by the Contractor in the Contract Area

up to the date of Commercial Production from the Contract Area

shall be aggregated, and the Contractor shall be entitled to

recover out of the Cost Petroleum from that Contract Area the

aggregate of such Development Costs at the rate of one hundred

percent (100%) per annum of such Development Costs beginning from

the date of such Commercial Production from the Contract Area.



13.6



The Contractor shall be entitled to recover out of the Cost

Petroleum produced from the Contract Area the Development Costs

which it has incurred on such Contract Area after the date of

Commercial Production from the Contract Area at the rate of one

hundred percent (100%) per annum of such Development Costs

beginning from the date such Development Costs are incurred.



13.7



The Contractor shall be entitled to recover in full during

any Financial Year the Production Costs incurred in the

38

Contract Area out of the Cost Petroleum.



13.8



If during any Financial Year the Cost Petroleum is not sufficient

to enable the Contractor to recover in full the Contract Costs due

for recovery in that Financial Year in accordance with the

provisions of Articles 13.1 through 13.7, then, subject to the

provisions of Article 13.1:

a)



recovery shall first be made of the Production Costs;

and



b)



recovery shall next be made of the Exploration Costs;

and



c)



recovery shall then be made of the Development Costs.



The unrecovered portions of Contract Costs shall be carried forward

to the following Financial Year and the Contractor shall be

entitled to recover such Costs in such Financial Year or the

subsequent Financial Years as if such costs were due for recovery

in that Financial Year, or the succeeding Financial Years, until

the unrecovered costs have been fully recovered out of Cost

Petroleum from the Contract Area.

13.9



For the purposes of this Article, as well as Article 14, costs,

receipts and income shall be converted into production unit

equivalents, and vice versa, using the relevant prices established



pursuant to Article 19 for Crude Oil and Article 21 for Natural

Gas.

13.10



Pending completion of the calculations required to establish

definitively the Contractor's entitlement to Cost Petroleum from

the Contract Area in any Financial Year, the Contractor shall take

delivery, provisionally, of volumes of Crude Oil and/or Natural Gas

representing its estimated Cost Petroleum entitlement calculated

with reference to estimated production quantities, costs and prices

for the Contract Area as established by the Contractor and approved

by the Management Committee. Such provisional determination of Cost

Petroleum shall be made every quarter on a cumulative basis. Within

sixty days of the end of each Financial Year, a final calculation

of the Contractor's entitlement to Cost Petroleum, based on actual

production quantities, costs and prices for the entire Financial

Year, shall be undertaken and any necessary adjustments to the Cost

Petroleum entitlement shall be agreed upon between the Government

and the Contractor and made as soon as practicable thereafter.



13.11



Nothing herein contained shall provide for the recovery of costs by

ONGC which were incurred prior to the Effective Date.

39

ARTICLE 14

PRODUCTION SHARING OF PETROLEUM BETWEEN

CONTRACTOR AND GOVERNMENT



14.1



The Contractor and the Government shall share in the Profit

Petroleum from the Contract Area in accordance with the provisions

of this Article. The share of Profit Petroleum, in any Financial

Year, shall be calculated for the Contract Area on the basis of the

Investment Multiple actually achieved by the Companies at the end

of the preceding Financial Year for the Contract Area as provided

in Appendix D.



14.2



Profit Petroleum

14.2.1



When the Investment Multiple of the Companies at

the end of any Financial Year is less than two

(2.0), the Government shall be entitled to take

and receive five percent (5%) and the Contractor

shall be entitled to take and receive ninety-five

percent (95%) of the total Profit Petroleum from

the Contract Area with effect from the start of

the succeeding Financial Year.



14.2.2



When the Investment Multiple of the Companies at

the end of any Financial Year in respect of any

Contract Area is equal to or more than two (2.0)

but is less than two and one-half (2.5), the

Government shall be entitled to take and receive

fifteen percent (15%) and the Contractor shall be

entitled to take and receive eighty-five percent

(85%) of the total Profit Petroleum from the

Contract Area with effect from the start of the

succeeding Financial Year.



14.2.3



When the Investment Multiple of the Companies at

the end of any Financial Year in respect of the

Contract Area is equal to or more than two and

one-half (2.5) but is less than three (3.0), the

Government shall be entitled to take and receive

twenty-five percent (25%) and the Contractor

shall be entitled to take and receive seventyfive percent (75%) of the total Profit Petroleum

from the Contract Area with effect from the start

of the succeeding Financial Year.



14.2.4



When the Investment Multiple of the Companies at

the end of any Financial Year in respect of the

Contract Area is equal to or more than three

(3.0) but is less than three and one-half (3.5),

the Government shall be entitled to take and

receive forty percent (40%) and the Contractor



shall be entitled to take and receive sixty

percent (60%) of the total Profit Petroleum from

the Contract Area with effect from the start of

40

the succeeding Financial Year.

14.2.4



When the Investment Multiple of the Companies at

the end of any Financial Year in respect of the

Contract Area is equal to or more than three and

one-half (3.5), the Government shall be entitled

to take and receive fifty percent (50%) and the

Contractor shall be entitled to take and receive

fifty percent (50%) of the total Profit Petroleum

from the Contract Area with effect from the start

of the succeeding Financial Year.



14.3



The value of the Companies' Investment Multiple at the end of any

Financial Year in respect of the Contract Area shall be calculated

in the manner provided for, and on the basis of net cash flows

specified, in Appendix D to this Contract. However, the volume of

Profit Petroleum to be shared between the Government and the

Contractor shall be determined for each quarter on a cumulative

basis. As regards the period from the Effective Date through the

end of the first full Financial Year, in view of the vagaries of

short-term financial records and to assure equitable calculation of

the Investment Multiple based on reasonable historical records, the

Investment Multiple calculated at the end of the first full

Financial Year shall be applied retroactively to the Effective

Date, and until the actual value can be determined, the provisional

Investment Multiple for that period shall be calculated on the

basis of Contractor's estimate of revenues and expenditures as

provided in the Development Plan. Pending finalization of accounts,

delivery of Profit Petroleum shall be taken by the Government and

the Contractor on the basis of provisional estimated figures of

Contract Costs, production, prices, receipts, income and any other

income or allowable deductions and on the basis of the value of the

Investment Multiple achieved at the end of the preceding Financial

Year. All such provisional estimates shall be finally approved by

the Management Committee but are deemed valid until such time as

the Management Committee reaches a decision or a decision is

rendered under Article 33. When it is necessary to convert monetary

units into physical units of production equivalents or vice versa,

the price or prices determined pursuant to Articles 19 and 21 for

Crude Oil and Natural Gas, respectively, shall be used. Within

sixty (60) days of the end of each Financial Year, a final

calculation of Profit Petroleum based on actual costs, quantities,

prices and income for the entire Financial Year shall be undertaken

and any necessary adjustments to the sharing of Profit Petroleum

shall be agreed upon between the Government and the Contractor and

made as soon as is practicable thereafter.



14.4



The Profit Petroleum due to the Contractor in any Financial Year

from the Contract Area shall be divided between the Parties

constituting the Contractor in proportion to their

41

respective Participating Interests.

42

ARTICLE 15

TAXES, ROYALTIES, RENTALS, ETC.



15.1



The Companies and the operations under this Contract shall be

subject to all fiscal legislation in India, except where, pursuant

to any authority granted under any applicable law, they are exempt

wholly or partly from the application of the provisions of a

particular law or as otherwise provided herein.



15.2.1



For the purpose of computing profits or gains of the business



consisting of and prospecting for or extraction or production of

Petroleum, there shall be made in lieu of the allowances admissible

under the Income Tax Act, 1961, such allowances as are specified in

this Agreement pursuant to Section 42 in relation to:

(a)



expenditure by way of infructuous or abortive

exploration expenses in respect of any area surrendered

prior to the beginning of Commercial Production; and



(b)



after the beginning of commercial production, to

expenditure incurred, whether before or after such

Commercial Production, in respect of drilling or

exploration activities or services or in respect of

physical assets used in that connection.



15.2.2



Payments made by the Companies pursuant to Article 16 shall be

deductible for income tax purpose in the year in which payment is

made by the Companies, as permissible under Section 42 of the

Income Tax Act, 1961.



15.3.1



In respect of matters not covered above, deduction shall be allowed

in accordance with other provisions of Income Tax Act, 1961, and

the rules framed thereunder.



15.3.2



The revenue from the Business consisting of Petroleum

Operations shall be determined in accordance with Article 19

for its Participating Interest share of Crude Oil saved and

sold, or otherwise disposed of, from each Field and from any

revenue realized on the sale of ANG or NANG referred to in

Article 21 as well as any other gains or receipts from

Petroleum Operations as reduced by the deductions as

specified within this Article, and, except as herein

provided, all the provisions of the Income Tax Act, 1961,

shall apply.

43



15.4



The following terms used in Section 42 of the Income Tax Act, 1961,

and Articles 15.2 and 15.3 shall have the meanings corresponding to

the terms used in this Contract and defined in Article 1 as

follows:



15.5



(a)



"Previous Year" means the year as defined in Section

2(34) of the Income Tax Act, 1961.



(b)



The other terms used herein and not defined in the Income

Tax Act, 1961 shall have the meaning therein ascribed in

Article 1.



Except for income tax as otherwise provided in this Article, the

Government covenants to the Companies that the Companies shall not

be liable to the Government for payment of:

(a)



any taxes calculated by reference to income from or

sale of Petroleum; or



(b)



any customs or excise duties, export duties or any other

statutory charge on the import or re-export of machinery,

plant, equipment, materials or supplies imported by or on

behalf of Contractor or its subcontractors solely and

exclusively for use in Petroleum Operations.



Any such payment, if the Companies are made liable shall be

reimbursed by the Government.

15.6.1



The constituents of the Contractor shall be liable to pay

royalties and cess on their Participating Interest share of

Crude Oil and Natural Gas saved and sold in accordance with

the provisions of this Agreement. The royalty on Oil saved

and sold will be paid at Rs. 481 per metric ton and cess on



Oil saved and sold will be paid at Rs. 900 per metric ton.

Royalty on Gas saved and sold will be paid at ten percent

(10%) of the value at wellhead. No cess shall be payable on

Gas or Condensate or other Natural Gas liquids produced in

association with Gas. Royalty and cess shall not exceed the

herein above amounts throughout the term of the Contract.

Royalty and cess shall be payable in Indian Rupees. Any such

additional payment shall be made by the Government.

15.6.2



All payments (except income tax) made by Contractor or its

constituents as applicable under appropriate law including, but not

limited to, taxes whether levied by the Central Government or state

government, or any other local or statutory authority, royalties,

cess, levies, duties, rentals, lease rent, license fees, export

duties,

44

countervailing duties, provision for sinking fund for environmental

or abandonment costs, or any other charges whatsoever, directly

attributable to Petroleum Operations shall be cost recoverable.



15.7



If any change in or to any Indian law, rule or regulation by any

authority dealing with income tax or other corporate tax,

export/import tax, customs duty, or tax imposed upon Petroleum or

dependent on the value of Petroleum (including Royalty and cess)

results in a material change to the economic benefits accruing to

any of the Parties to this Contract after the Effective Date, the

Parties shall consult promptly to make necessary revisions and

adjustments to the Contract in order to maintain such expected

benefits to each of the Parties.

45

ARTICLE 16

PAYMENT



16.1



The Companies shall pay to ONGC in consideration of the right to

commence and carry out exploration and drilling activities in the

Contract Area, pursuant to and in accordance with the Notice

Inviting Offers for Joint Ventures to Develop Medium Size Oil and

Gas Fields in India- 1992 and the bid submitted in response

thereto, as follows:

(a)



within two (2) days following the Effective Date,

excluding days on which the banks in India or the

United States are closed, Three Million Six Hundred

Thousand United States Dollars (US$3,600,000). EOGIL

shall pay One Million Eight Hundred Thousand United

States Dollars (US$1,800,000) and RIL shall pay One

Million Eight Hundred Thousand United States Dollars

(US$1,800,000). ONGC's bank wire transfer instructions

are as follows:

ACCOUNT NUMBER: 01 00000 3054

OIL & NATURAL GAS CORPORATION LIMITED

STATE BANK OF INDIA, OVERSEAS BRANCH

VIJAYA BUILDING,

BARAKHAMBA ROAD,

NEW DELHI, INDIA 110 001



(b)



When and if the hereinafter set forth production

quantities are reached, the Companies will within fifteen

(15) days following such attainment pay ONGC in accordance

with the following schedule:

(i)



Another Six Million United States Dollars

(US$6,000,000) after achieving a cumulative

production of fifty million barrels of Oil;



(ii)



Another Nine Million United States Dollars

(US$9,000,000) after achieving a cumulative

production of one hundred million barrels

of Oil; and



(iii)



Another Fifteen Million United States

Dollars (US$15,000,000) after achieving a

cumulative production of two hundred

million barrels of Oil.



16.2



Cumulative production shall, for purposes of this Article,

mean Oil produced.



16.3



Each Company shall pay its share of the payment in the

proportion that it received Petroleum.

46

ARTICLE 17

CUSTOMS DUTIES



17.1



Machinery, plant, equipment, materials and supplies imported by a

Contractor or its Subcontractors for use in Petroleum Operations

shall be exempted from customs duties subject to compliance with

procedures, if any, as may be determined pursuant to applicable

customs duty legislation, Article 23 and the terms herein

specified.



17.2



Contractor shall, from time to time and as required, submit to the

Government a list of Subcontractors who are engaged by it for the

purpose of obtaining the various categories of items pursuant to

the conduct of Petroleum Operations and who may claim exemptions

hereunder.



17.3



In order to qualify for the exemption from customs duties as

provided for in Article 17.1, all imported items for which duty

exemption is being claimed shall be certified, by a representative

of the Contractor, to be imported under the terms of this Contract

for use in carrying out Petroleum Operations and shall be certified

by a representative of the Government to be eligible for such

exemption pursuant to the terms of the Contract. In order to

expedite such exemption, Contractor may submit a certified list of

qualified items up to sixty (60) days in advance of anticipated

import.



17.4



The Government shall have the right to inspect the records and

documents of the physical item or items for which an exemption is

or has been provided under Article 17.1 to determine that such item

or items are being or have been imported for the purpose for which

the exemption was granted. The Government shall also be entitled to

inspect such physical items wherever located to ensure that such

items are being used or held for the purpose herein specified and

any item not being so used shall immediately become subject to

payment of the applicable customs duties.



17.5



Subject to Article 27, the Contractor and its Subcontractors may

sell or otherwise transfer in India or sell for export all imported

items which are no longer required for Petroleum Operations,

subject to applicable laws governing customs duties and sale or

disposal of such items.

47

ARTICLE 18

DOMESTIC SUPPLY, SALE, DISPOSAL AND

EXPORT OF CRUDE OIL



18.1



Until such time as the total availability to the Government and

government companies of Crude Oil from all Petroleum production

activities in India meets the total national demand, as determined

by the Government, each constituent of the Contractor shall be

required to offer to the Government or its nominee all of the

Contractor's entitlement to Crude Oil from each Field in order to

assist in satisfying the national demand, provided, however, that

nothing contained in any contract entered into by the Contractor

for the supply, sale or disposal of Petroleum, with any nominee of

the Government pursuant to this Contract shall in any manner

abrogate the obligation of the Government contained herein.



18.2



Pursuant to Article 18.1 and subject to Articles 18.4 and 18.6,



each constituent of Contractor shall offer to sell to the

Government (or its nominee) its total Participating Interest share

of Crude Oil to which it is entitled under Articles 13 and 14 at

the price determined in accordance with Article 19 for sales to

Government and the Government shall have the option to purchase the

whole or any portion thereof at the said price.

18.3



The aforementioned offer shall be made by each constituent of

Contractor, in writing, at least six (6) months preceding the

Financial Year in which the sale is to be made, specifying the

estimated quantities and grade of Crude Oil being offered (based

upon estimates which shall be adjusted within ninety (90) days of

the end of each Financial Year on the basis of actual quantities

produced and saved). The Government shall exercise its option to

purchase, in writing, not later than ninety days (90) preceding the

Financial Year in respect of which the sale is to be made,

specifying the quantity and grade of Crude Oil which it elects to

take in the ensuing year. Failure by the Government to give such

notice within the period specified shall be conclusively deemed an

election to take all of the Crude Oil offered (adjusted as provided

herein) in the ensuing Financial Year.

Notwithstanding the above, during the first six (6) months

commencing with the Effective Date of this Contract, notices cited

in Article 18.3 shall be given as soon as practicable and are

deemed to satisfy the notice obligations of this Article 18.3.



18.4



If, during any Financial Year, India attains Self-Sufficiency, the

Government shall promptly thereafter, but in no event later than

the end of that Financial Year, so advise the Contractor by written

notice. In such event, as from the end of the first quarter of the

following Financial Year, or such earlier date as the Parties may

48

mutually agree, Government's option to purchase shall be suspended

and each constituent of Contractor shall have the right to lift and

export their Participating Interest share of Crude Oil until such

time, if any, as Self-Sufficiency shall have ceased to exist. If

Self-Sufficiency ceases to exist during a Financial Year, the

Government shall recover its option to purchase under Article 18.2

in respect of the following Financial Year by giving notice thereof

to the Contractor as provided in Article 18.3.



18.5



All payments in respect of sales to the Government pursuant to

provisions of this Article 18 shall be made by the Government

within the period for credit applicable in the calculation of the

price pursuant to Article 19. If no time frame for credit is

applicable in such calculation, payment shall be made within forty

five (45) days from the date the invoice is delivered to the

Government. Contractor shall submit a monthly invoice to the

Government for the quantity of Crude Oil delivered. Payment shall

be made in United States Dollars by bank wire to the credit of the

Foreign Company's designated account with a bank within or outside

India. All amounts unpaid by the Government by the due date shall,

from the due date, bear interest calculated on a day-to-day basis

at the LIBOR plus one percentage (1%) point from the due date

compounded daily until paid.



18.6



If full payment is not received by Contractor when due as provided

in Article 18.5, the Contractor shall, at any time thereafter,

notify the Government of the default and, unless such default is

remedied within fifteen (15) days from the date of the notice, the

Contractor shall have the right, unless otherwise agreed, upon

written notice to the Government and without prejudice to the

Contractor's right to recover all costs, charges, expenses and

losses, incurred by the Contractor:

a)



to suspend the Government's option to purchase under

Article 18.2 and transport the Petroleum to any onshore

facility and sell as each constituent of Contractor may

in its absolute discretion deem fit;



b)



without prejudice to the foregoing, to freely lift,

sell and export all its Participating Interest share of



Crude Oil subject to the destination restrictions

specified in Article 18.7, until the Government has

paid the due amount plus interest as provided herein;

c)



if the payment plus interest is not received by the

Contractor within one hundred and eighty (180) days

from the date the payment was due, to receive and

export the Government's share of Profit Oil until such

time as either Government has paid all amounts due plus

interest, or the value, based on the price as determined in accordance with Article 19, of Government's

share of Profit Oil so sold is equal to all amounts due

49

plus interest, whichever first occurs; provided, however,

that if the Government makes a payment to the Contractor

after the Contractor has commenced sale of Government's

share of Profit Oil and such payment together with the

value of Government's share of Profit Oil sold (based on

the price determined in accordance with Article 19)

exceeds the amount due plus interest, necessary adjustment

shall be carried out to refund to the Government forthwith

the excess amount received by the Contractor.



18.7



The Contractor shall be entitled to freely lift, sell and export

any Crude Oil which the Government is unable to take or has elected

not to purchase pursuant to this Article 18 subject to Government's

generally applicable destination restrictions to countries with

which the Government, for policy reasons, has severed or restricted

trade.



18.8



No later than sixty (60) days prior to the commencement of

production in a Field (or Fields where production is from more than

one Field), and thereafter no less than sixty (60) days before the

commencement of each Financial Year, the Contractor shall cause to

be prepared and submitted to the Parties a production forecast

setting out the total quantity of Crude Oil that it estimates can

be produced from a Field during the succeeding year, based on the

maximum efficient rate of recovery of Crude Oil from that Field in

accordance with good petroleum industry practice. No later than

thirty (30) days prior to the commencement of each Calendar

Quarter, the Contractor shall advise its estimate of production for

the succeeding Calendar Quarter and shall endeavour to produce the

forecast quantity for each Calendar Quarter.

Notwithstanding the above, during the first six (6) months

commencing with the Effective Date of this Contract, notices cited

in Article 18.8 shall be given as soon as practicable and are

deemed to satisfy the notice obligations of this Article 18.8.



18.9



Each Party comprising the Contractor shall, throughout the term of

this Contract, have the right to separately take in kind and

dispose of all its share of Cost Petroleum and Profit Petroleum and

shall have the obligation to lift the Cost Petroleum and Profit

Petroleum on a current basis and in such quantities so as not to

cause a restriction of production or inconvenience to the other

Parties.



18.10



The Government shall, throughout the term of this Contract, have

the right to separately take in kind and dispose of its share of

Profit Petroleum and of such portion of the Contractor's share of

Petroleum as is purchased by the Government pursuant to Article 18,

subject to Article 18.6 and shall have the obligation to lift all

of the Oil on a current basis and in such quantities so as not to

cause a

50

restriction of production or inconvenience to the other Parties.

Subject to Force Majeure, any Party with an obligation to lift Oil

and failing to do so shall compensate the other Parties for any

loss of revenue due to such failure and will, at its own cost and

risk, be liable for all incident expenses, including demurrage, if

any.



18.11



For the purpose of implementing the provisions of Articles 18.9 and

18.10, a Crude Oil lifting procedure shall be agreed upon by the

Parties as soon as practicable but no later than two (2) months

after the Effective Date of this Contract. Such lifting procedure

shall include, but not necessarily be limited to:

(a)



a procedure for notification by the Operator to the

Government, and to each Party comprising the

Contractor, of projected Crude Oil production;



(b)



a procedure for notification by the Government, and by

each Party comprising the Contractor, to the Operator, of

its expected offtake and the consequences of inability or

failure to offtake.

51

ARTICLE 19

VALUATION OF OIL



19.1



For the purpose of this Contract, the value of Crude Oil shall be

based on the price determined as provided herein.



19.2



A price for Crude Oil shall be determined for each Calendar Month

or such other period as the Parties may agree (hereinafter referred

to as "the Delivery Period") in terms of United States Dollars per

Barrel, FOB Delivery Point for Crude Oil produced and sold or

otherwise disposed of from each Contract Area, for each Delivery

Period, in accordance with the appropriate basis for that type of

sale or disposal specified below.



19.3



In the event that some or all of Contractor's total sales of Crude

Oil during a Delivery Period are made to third parties in Arms

Length Sales, all sales so made shall be valued at the weighted

average of the prices actually received by Contractor, calculated

by dividing the total receipts from all such sales FOB the Delivery

Point by the total number of Barrels of the Crude Oil sold in such

sales.



19.4



19.3.1



In the event that a portion of such third party

Arms Length Sales are made on a basis other than

an FOB basis as herein specified, the portion

shall be valued at the prices equivalent to the

prices FOB the Delivery point for such sales

determined by deducting all costs (such as

transportation, demurrage, loss of Crude Oil in

transit and similar costs) incurred downstream of

the Delivery Point, and the prices so determined

shall be deemed to be the actual prices received

for the purpose of calculation of the weighted

average of the prices for all third party Arms

Length Sales for the Delivery Period.



19.3.2



Each constituent of Contractor shall separately

submit to the Government, within fifteen (15)

days of the end of each Delivery Period, a report

containing the actual prices obtained in their

respective Arms Length Sales to third parties of

any Crude Oil. Such reports shall distinguish

between term sales and spot sales and itemize

volumes, customers, prices received and credit

terms, and the constituent of the Contractor

shall allow the Government to examine the

relevant sales contracts.



In the event that some or all of a constituent of Contractor's

total sales of Crude Oil during a Calendar Month are made to the

Government, the price of all sales so made shall, unless otherwise

agreed between the Parties, be determined on the basis of either

the FOB selling price per Barrel of one or more crude oils which,

at the time of

52

calculation, are being freely and actively traded in the

international market and are similar in characteristics and quality



to the Crude Oil and/or Condensate in respect of which the price is

being determined, such FOB selling price to be ascertained from

Platt's Crude Oil Market Wire daily publication ("Platt's"), or the

spot market for the same crude oils ascertained in the same manner,

whichever price, in the opinion of the Parties, more truly reflects

the current value of such crude oils. For any Calendar Month in

which sales take place, the price shall be the arithmetic average

price per Barrel determined by calculating the average for the

preceding Calendar Month of the mean of the high and low FOB or

spot prices for each day of the crude oil(s) selected for

comparison adjusted for differences in the Crude Oil and the crude

oil(s) being compared for quality, transportation costs, delivery

time, quantity, payment terms, the market area into which the Crude

Oil is being sold, other contract terms to the extent known and

other relevant factors. In the event that Platt's ceases to be

published or is not published for a period of thirty (30)

consecutive days, the Parties shall agree on an alternative daily

publication.



19.5



19.4.1



Notwithstanding anything herein otherwise

provided, the price paid for such sales shall be,

in any Calendar Month,the FOB selling price for a

Marker Crude ("Marker Crude") which shall be Brent

(DTD) on a United States Dollar per Barrel basis

less US$0.10 per Barrel.



19.4.2



The Marker Crude price will be based on the

previous Calendar Month's average of the daily

low and high quotations of Marker Crude as

published by Platts' Market wire. The average is

to be calculated up to three (3) decimals to

arrive at a United States Dollar per Barrel

price, which will be applicable for the month of

supply.



19.4.3



The Government and/or its nominee shall pay any

and all sales tax payable on the sale of Oil to

the Government or its nominee.



19.4.4



The Government and/or its nominee shall enter into

a Crude Oil sales agreement with the Constituents

of the Contractor which shall contain terms and

conditions normally contained in international

Crude Oil sales agreements of a similar nature.



In the event that in any Delivery Period some but not all of a

constituent of Contractor's sales of Crude Oil from the Contract

Area are made to the Government or a Government company and some

but not all of a constituent of Contractor's sales of Crude Oil

from the Contract Area are

53

made to third parties in Arms Length Sales and the price as

established in accordance with Article 19.4 differs by more than

one percent (1%) from the price as determined in accordance with

Article 19.3 for the same Delivery Period, the Parties shall meet,

upon notice from any Party, to determine if the prices established

for the relevant Delivery Period for sales to the Government should

be adjusted taking into account third party Arms Length Sales made

by a constituent of Contractor of the same or similar Crude Oil

from the relevant Field or other fields and published information

in respect of other genuine third party Arms Length Sales of the

same or similar crude oil for that Delivery Period. Until the

matter of an adjustment for the relevant Delivery Period is finally

determined , the price as established in accordance with this

Article will apply for that Delivery Period. Any adjustment, if

necessary, will be made within thirty (30) days from the date the

adjustment for that Delivery Period is finally determined.



19.6



A constituent of Contractor shall determine the relevant prices in

accordance with this Article and the calculation, basis of

calculation and the price determined shall be supplied to the

Government and shall be subject to agreement by the Government

before it is finally determined. Pending final determination, the



last established price, if any, for the Crude Oil shall be used.

19.7



In the event that the Parties fail to reach agreement on any matter

concerning selection of the crude oil(s) for comparison, the

calculation, the basis of, or mechanism for the calculation of the

prices, the prices arrived at, the adjustment of any price or

generally about the manner in which the prices are determined

according to the provisions of this Article within thirty (30)

days, or such longer period as may be mutually agreed between the

parties, from the date of commencement of Commercial Production or

the end of each Delivery Period thereafter, any Party may refer the

matter or matters in issue for final determination by a sole expert

appointed as provided in Article 33.

19.7.1



Within ten (10) days of the said appointment, the

Parties shall provide the expert with all

information they deem necessary or as the expert

may reasonably require.



19.7.2



Within fifteen (15) days from the date of his

appointment, the expert shall report to the

Parties on the issue(s) referred to him for

determination, applying the criteria or mechanism

set forth herein and indicate his decision

thereon to be applicable for the relevant

Delivery Period for Crude Oil and such decision

shall be accepted as final and binding by the

Parties.

54



19.7.3



Except for the adjustment referred to in

Article 19.5, any price or pricing mechanism

agreed by the Parties pursuant to the provisions

of this Article shall not be changed

retroactively.



19.8



Any sale or disposal to Affiliates or other sale or disposal of

Crude Oil produced from a Field, other than to the Government or

Government companies or to third parties in Arms Length Sales, in

any Delivery Period, shall be valued on the same basis as sales to

the Government or a Government company. In the event of such a sale

or disposal by a Company, such Company shall submit to the

Government, within fifteen (15) days of the end of each Delivery

Period, all relevant information concerning such sales or

disposals.



19.9



In the event that in any Delivery Period there is more than one

type of sales referred to in Articles 19.3, 19.4 and 19.8, then,

for the purpose of calculating Cost Petroleum and Profit Petroleum

entitlement pursuant to Articles 13 and 14, a single price per

Barrel of Crude Oil for all the sales for the relevant Delivery

Period shall be used. Such single price shall be the weighted

average of the prices determined for each type of sale, weighted by

the respective volumes of Crude Oil sold in each type of sale in

the relevant Delivery Period.



19.10



In this Article the term "Government" shall include any other

agency or nominee of the Government to whom Crude Oil is to be

sold.



19.11



The provisions specified above for the determination of the price

of sales of Crude Oil shall apply mutatis mutandis to Condensates.



19.12



The Parties shall meet annually, or sooner upon notice served by

any Party on the others, to review the list of selected Crude Oils

or the mechanism established pursuant to this Article 19 in light

of any new facts since the date of selection of such Crude Oils or

establishment of such mechanism and to determine what adjustment

(if any) should be made to the said selection or mechanism by

mutual agreement of the Parties.

55

ARTICLE 20

CURRENCY AND EXCHANGE CONTROL PROVISIONS



20.1



Subject to the provisions herein, and to compliance with the

relevant provisions of the laws of general application in India

governing currency and foreign exchange and related administrative

instructions and procedures issued thereunder on a

non-discriminatory basis, each Foreign Company comprising the

Contractor shall, during the term of this Contract have the right

to:

(a)



repatriate funds relating to Petroleum Operations abroad,

in United States Dollars or any other freely convertible

currency acceptable to the Government and the Foreign

Company;



(b)



receive, retain and use abroad the proceeds of any

export sales of Petroleum under the contract;



(c)



open, maintain and operate bank accounts with reputable

banks, both inside and outside India, for the purpose

of this Contract;



(d)



freely import, through normal banking channels, funds

necessary for carrying out the Petroleum Operations;



(e)



convert into foreign exchange and repatriate sums

imported pursuant to (d) above in excess (if any) of

its requirements; and



(f)



make payments of interest and principal outside of India

for purchases, services and loans obtained abroad without

the requirement that funds used in making such payments

must come from or originate in India.



Provided however, that repatriation pursuant to sub-paragraphs (a)

and (e) and payments pursuant to sub-paragraph (f) shall be subject

to the provisions of any treaties or bilateral arrangements between

the Government and any country with respect to payments to that

country.

20.2



The rates of exchange for the purchase and sale of currency by the

Contractor shall be the prevailing rates of general application

determined by the State Bank of India or such other financial body

as may be mutually agreed by the Parties and in accordance with

prevailing currency and exchange regulations and, for accounting

purposes under this Contract, these rates shall apply as provided

in Section 1.6 of Appendix C.



20.3



Domestic Companies shall be subject to the relevant provisions of

the applicable laws in India governing currency and foreign

exchange and related administrative instructions and procedures

issued thereunder.

56

ARTICLE 21

NATURAL GAS



21.1



Subject to Article 21.2, the Indian domestic market shall have the

first call on the utilisation of Natural Gas discovered pursuant to

Petroleum Operations and produced from the Contract Area.

Accordingly, any proposal by the Contractor relating to Discovery

and production of Natural Gas from the Contract Area shall be made

in the context of the Government's policy for the utilisation of

Natural Gas and shall take into account the objectives of the

Government to develop its resources in the most efficient manner

and to promote conservation measures.



21.2



Contractor shall have the right to use Natural Gas produced from

the Contract Area for the purpose of Petroleum Operations

including, but not limited to, reinjection for pressure maintenance

in the Oil Fields, Gas lifting and power generation.



21.3



For the purpose of sales to the domestic market pursuant to this

Article 21, the Delivery Point shall be the Delivery Point set

forth in the Gas sales contract entered into by the Contractor.



21.4



ASSOCIATED NATURAL GAS (ANG)

21.4.1



In the event that a New Discovery of Crude Oil

contains ANG, Contractor shall declare in the

proposal for the declaration of the New Discovery

as a Commercial Discovery as specified in

Article 9, whether (and by what amount) the

estimated production of ANG is anticipated to

exceed the quantities of ANG which will be used

in accordance with Article 21.2 (hereinafter

referred to as "the Excess ANG"). In such event

the Contractor shall indicate whether, on the

basis of the available data and information, it

has reasonable grounds for believing that the

Excess ANG could be commercially exploited in

accordance with the terms of this Contract along

with the Commercial Production of the Crude Oil

from the Oil Field, and whether the Contractor

intends to so exploit the Excess ANG.



21.4.2



Based on the principle of full utilization and

minimum flaring of ANG, a proposed development

plan for an Oil Field (or Oil Fields), shall, to

the extent economically reasonable, include a

plan for utilisation of the ANG from the Existing

Discovery and New Discovery, including estimated

quantities to be flared, reinjected, and to be

used for Petroleum Operations; and, if the

Contractor proposes to commercially exploit the

Excess ANG for sale in the domestic market in

57

accordance with Government's policy, or

elsewhere, the proposed plans for such

exploitation.

If an Existing Discovery is determined to possess

Excess ANG, and such Existing Discovery is

producing or capable of producing as of the

Effective Date of this Contract, Contractor is

granted the right to flare, without penalty or

limitation, such Excess ANG until Gas

transportation facilities, if any, can be provided

for, and such right shall be extended to such

future time or times as such Gas transportation

facilities may become unavailable or their

capacity would restrict or limit production of

Crude Oil. Government will use its good offices to

effect early reduction and/or elimination of such

flaring by causing Gas transportation to be made

available at reasonable rates if a proposal to

that effect is proposed by Contractor or a Company

and approved by the Management Committee.



21.4.3



If the Contractor wishes to exploit the Excess

ANG (whether from an Existing or New Discovery),

such ANG shall first be offered for sale to the

Government (or its nominee) in writing in

accordance with the terms of this Contract. On

receipt of such offer, the Government (or its

nominee) shall, within three (3) months of the

date of receipt thereof, notify the Contractor,

in writing, whether or not it wishes to exercise

its option to purchase the Excess ANG.



21.4.4



If the Government exercises its option to

purchase the Excess ANG as provided in

Article 21.4.3:

(a)



the Government shall indicate in the notice

exercising the option, a date, within two

(2) years of the date of the Contractor's

offer, for commencement of purchase of the

Excess ANG;



(b)



21.4.5



within six (6) months of the date of

notification of the exercise of the

Government's option pursuant to Article

21.4.3., the Contractor and the Government

(or its nominee) shall agree on the terms

for the sale to Government (or its nominee)

of the Excess ANG.



If the Government does not exercise its option to

purchase the Excess ANG the Contractor shall be

58

free to explore markets for the commercial

exploitation of the Excess ANG.



21.4.6



Where the Contractor is of the view that Excess

ANG cannot be commercially exploited, and chooses

not to exploit ANG, or is unable to find a market

for the Excess ANG pursuant to Article 21.4.5, the

Government shall be entitled to take and utilise

such Excess ANG.



21.4.7



If the Government elects to take the Excess ANG

as provided in Article 21.4.6:

(a)



the Contractor shall deliver such Excess

ANG to the Government (or its nominee) free

of cost, at the downstream flange of the

Gas/Oil separation facilities;



(b)



the Government or its nominee shall bear

all costs including gathering, treating,

processing and transporting costs beyond

the downstream flange of the Gas/Oil

separation facilities;



(c)



the delivery of such Excess ANG shall be

subject to procedures to be agreed between

the Government or its nominee and the

Contractor prior to such delivery, such

procedures to include matters relating to

timing of off-take of such Excess ANG,

which procedures shall not, in any way,

restrict Oil production.



21.4.8



Excess ANG which is not commercially exploited by

the Contractor, or taken by the Government or its

nominee pursuant to this Article 21, shall be

returned to the subsurface structure or flared

where such flaring is approved in the Development

Plan, which approval shall not be unreasonably

withheld, for the relevant Oil Field or where

reinjection is uneconomical or inadvisable in

accordance with good reservoir engineering practices.



21.4.9



Where the Contractor is of the view that there is

economic merit in flaring Gas in the absence of a

Gas transmission system or during such time as

the pipeline is inoperable or lacks capacity to

take all available Gas, Contractor shall have the

right to flare Gas. In any such event,

Contractor shall notify the Management Committee

within forty-eight (48) hours to obtain its

approval for continuing operations.

59



21.4.10



As soon as practicable after the New Discovery

referred to in Article 21.4.1 or the submission

to the Government of the proposal for the

declaration of the New Discovery as a Commercial

Discovery as therein specified, the Contractor



and the Government or its nominee shall meet to

discuss the sale and/or disposal of any ANG

discovered with a view to giving effect to the

provisions of this Article 21 in a timely manner.

21.4.11



21.5



Notwithstanding the above, during the first six

(6) months commencing with the Effective Date of

this Contract, notices cited in Article 21.4 shall

be given as soon as practicable and are deemed to

satisfy the notice obligations of this Article

21.4.



NON ASSOCIATED NATURAL GAS (NANG)

21.5.1



In the event of a New Discovery of NANG, the

Contractor shall promptly report such New

Discovery to the Management Committee and the

provisions of Articles 9.1 and 9.2 shall apply.

The remaining provisions of Article 9 would apply

to the New Discovery and development of NANG only

in so far as they are not inconsistent with the

provisions of Articles 21.5.1 to 21.5.13.



21.5.2



If, pursuant to Article 9.1, the Contractor gives

notification that a New Discovery is of potential

commercial interest, the Contractor shall submit

to the Management Committee, within one (1)

Calendar Year from the date of notification of

the above New Discovery, the proposed Appraisal

Programme, including a Work Programme and budget

to carry out an adequate and effective appraisal

of such New Discovery, to determine (i) without

delay, whether such New Discovery is a Commercial

Discovery and (ii) with reasonable precision, the

boundaries of the area to be delineated as a

Field. Such programme shall be supported by all

relevant data such as Well data, Contractor's

best estimate of reserve range and production

potential and shall indicate the date of

commencement of the proposed Appraisal Programme.

Where in the case of an Existing Discovery,

Contractor desires to carry out additional

appraisal work, the Contractor shall submit its

proposed Appraisal Programme with a Work

Programme and budget to the Management Committee

within one hundred twenty (120) days of the

Effective Date for approval.



21.5.3



The proposed Appraisal Programme for an Existing

Discovery or a New Discovery shall be considered

60

by the Management Committee within sixty (60) days

of its submission by the Contractor and the

programme together with the Work Programme and

budget submitted by the Contractor revised in

accordance with any agreed amendments or additions

thereto approved by the Management Committee,

shall be adopted as the Appraisal Programme and

the Contractor shall promptly proceed with

implementation of such programme.



21.5.4.



If on the basis of the results of the Appraisal

Programme, the Contractor is of the opinion that

NANG has been discovered in commercial

quantities, it shall submit to the Management

Committee, as soon as practicable but not later

than five (5) years from the date of notification

of the aforementioned New Discovery, a proposal

for the declaration of the New Discovery as a

Commercial Discovery. Such proposal shall take

into account the Government's policies on Gas

utilisation and propose alternative options (if

any) for use or consumption of the NANG and be



supported by, inter alia, technical and economic

data, evaluations, interpretations and analyses

of such data, feasibility studies relating to the

New Discovery prepared by or on behalf of the

Contractor and other relevant information.

21.5.5



In the case of a New Discovery, simultaneously

with the Contractor's Appraisal Programme,

Government and the Contractor shall seek to reach

an agreement on the development, production,

processing, utilisation and sale of the NANG, in

the context of Article 21.1, within thirty-six

(36) months of the date of notification of the

Discovery referred to in Article 21.5. If no

proposal is submitted to the Management Committee

by the Contractor within five (5) years from the

date of notification of such New Discovery, the

Contractor shall relinquish its rights to develop

such New Discovery and the area relating to such

New Discovery shall be excluded from the Contract

Area.



21.5.6



Where the Contractor has submitted a proposal for

the declaration of a New Discovery as a

Commercial Discovery, the Management Committee

shall consider the proposal of the Contractor

with reference to commercial utilisation of the

NANG in the domestic market or elsewhere and in

the context of Government's policy on Gas

utilisation and the chain of activities required

to bring the NANG from the Delivery Point to

61

potential consumers in the domestic market or

elsewhere. The Management Committee may, within

ninety (90) days, request that the Contractor

submit any additional information on the New

Discovery and the related Appraisal Programme that

it may reasonably require to facilitate a decision

on whether or not to declare the New Discovery as

a Commercial Discovery.



21.5.7



21.5.8



The Management Committee shall make a decision

regarding the declaration of a New Discovery as a

Commercial Discovery within the latter of:

(a)



one hundred eighty (180) days of receipt of

such proposal; or



(b)



one hundred eighty (180) days of receipt of

the additional information referred to

above.



If the Management Committee, with the approval of

the Government, declares a New Discovery a

Commercial Discovery, such declaration shall be

accompanied by an indication of the probable

date(s) by when the market(s) would be ready to

receive the Gas and an estimate of the quantities

of Gas that could be so utilised. The

Contractor, in such an event, shall, within One

(1) Calendar Year of the declaration of the New

Discovery as a Commercial Discovery, submit a

Development Plan for the development of the Gas

Field to the Management Committee for its

approval. Such plan shall be supported by all

relevant information including, inter alia, the

information required in Article 9.6. In the case

of an Existing Discovery, Contractor shall within

ninety (90) days of the Effective Date propose a

Development Plan following the plan brought out



in Appendix G, intended to achieve the production

profile brought out in Appendix H, containing the

detailed information required in Article 9.6,

with supporting budget and the Management

Committee shall render its decision regarding

such proposal within thirty (30) days of such

submittal. Where a Development Plan is so

agreed, it shall be an approved Development Plan

pursuant to this Article.

62

21.5.9



If the Development Plan has not been approved by

the Management Committee within one hundred and

eighty (180) days of its submission, the

Contractor shall have the right to submit such

plan or plans directly to the Government for

approval, within sixty (60) days of the expiry of

the time provided to the Management Committee to

approve the plan or plans. The Government shall

respond to the submission within ninety (90) days

of receipt thereof. If the Government rejects

the Contractor's proposed plan or plans, the

Government shall state in writing the reasons for

such rejection and the Contractor shall have the

right to resubmit, within sixty (60) days of

written notice of such rejection, such plan or

plans duly amended to meet the Government's

objections thereto. Such right of resubmission

of each proposed plan or plans shall be

exercisable by the Contractor only once. If the

Parties are unable to agree, any Party shall have

the right to submit the matter to arbitration.

If no such plan or plans is/are submitted to the

Government within the aforesaid period, the

Contractor shall relinquish its right to develop

such Gas Field and such Gas Field shall be

excluded from the Contract Area.



21.5.10



If the Management Committee is unable to agree on

the declaration of a New Discovery as a

Commercial Discovery within the time limit

prescribed in Article 21.5.7, the Contractor, or

any of its constituents, shall be entitled to

submit such proposal directly to the Government

for approval. In such event, the Contractor, or

any of its constituents, shall also submit a

comprehensive plan or plans for development of

such New Discovery, which shall detail the

proposed Development Plan for utilisation of the

NANG produced in the domestic market giving,

inter alia, the data specified in Article 21.5.8.

The proposal for declaration of the New Discovery

as a Commercial Discovery as well as the proposed

Development Plan shall be submitted to the

Government within one hundred and eighty (180)

days of the expiry of the time given to the

Management Committee to reach a decision on the

proposal for declaration of the New Discovery as

a Commercial Discovery and Government shall

respond to the said submission within one hundred

63

twenty (120) days of its receipt. If the

Government disapproves the proposed plan or plans,

the Government shall state in writing the reasons

for such disapproval and the concerned Parties

shall have the right to resubmit, within sixty

(60) days, such plan or plans duly amended to meet

the Government's objections thereto. Such right of

resubmission of each proposed plan or plans shall

be exercisable by the Contractor only once. In the

event the Government does not approve such plan or



plans, any Party shall have the right to submit

the matter to arbitration. If no such plan (plans)

is (are) submitted to the Government within the

aforesaid period, the Contractor shall relinquish

its rights to develop such Gas Field and such Gas

Field shall be excluded from the Contract Area.

21.5.11



In the event the Management Committee , or

Government, as the case may be, approves the

Contractor's proposal for declaration of the New

Discovery as a Commercial Discovery and also the

comprehensive plan or plans for development of

such New Discovery and for the utilisation of

NANG produced in the domestic market, the Gas

Field shall be promptly developed by the

Contractor in accordance with the approved plan

which shall be the Development Plan for the

Field.



21.5.12



In the event the Contractor does not commence

development of a New Discovery within ten (10)

years from the date of completion of the first

Discovery Well, the Contractor shall relinquish

its rights to develop such New Discovery and the

area relating to such New Discovery shall be

excluded from the Contract Area.



21.5.13



The price of the ANG and NANG produced from the

Oil or Gas Field for use in India shall be

specified in the Gas sales contract, which shall

be in accordance with the provisions of this

Article 21.5.13, between the Contractor and the

nominee of the Government.

(a)



Unless the context otherwise requires, the

following words and terms wherever and

whenever used or appearing in this

64

Article 21.5.13 shall have the following

meaning:

(i)



"British Thermal Unit" or "BTU"

means the amount of energy

required to raise the temperature

of one (1) pound (avoirdupois) of

pure water, at sixty degrees

(60(degree)) Fahrenheit, one

degree (1(degree)) Fahrenheit at

an absolute pressure of 14.73

pounds per square inch.



(ii)



"Buyer" means the Government of

India or as Authority of India

Limited ("GAIL").



(iii)



"Deliverability" means the lesser

of the maximum aggregate rate of

all wells in the Contract Area or

the maximum delivery capacity of

the processing facility, subject

to generally accepted

international petroleum industry

practices.



(iv)



"Delivery Point" means the

upstream weld at the underwater

connection between

Seller'spipeline and ONGC's

underwater Gas transmission line

or lines which transport Gas from



the Bassein Field to the Hazira

area.



(b)



(v)



"Maximum Delivery Pressure" has

the meaning set forth in Article

21.5.13(c).



(vi)



"MMBTU" means one million

(1,000,000) BTU's on a net

heating value basis.



(vii)



"Seller" means Contractor.



The Seller agrees to produce and deliver,

on a daily basis, to the Buyer one hundred

percent (100%) of the Deliverability of ANG

and NANG and Condensate delivered therewith

at the Delivery Point and the Buyer,

provided the Gas and Condensate are made

available and tendered for delivery by the

Seller, agrees to take and purchase, on a

daily basis, one hundred percent (100%) of

the Deliverability of ANG and NANG and

Condensate delivered therewith, provided,

however, that Seller, at Seller's sole

discretion, subject to generally accepted

operator practices in the international

petroleum industry, may adjust deliveries

to provide for necessary maintenance,

service and testing. Buyer may request that

Seller vary deliveries to accommodate

similar circumstances in the

65

Buyer's operation and Seller's approval

shall not be unreasonably withheld.

Communications procedures shall be mutually

agreed in the Gas sales contract in

accordance with internationally accepted

industry standards.



(c)



The Gas and Condensate sold hereunder shall

be separated into Gas and Condensate at the

offshore processing facility, measured

separately, and recombined and delivered at

the Delivery Point at the operating

pressure of the Buyer's owned or contracted

pipeline up to a maximum pressure ("Maximum

Delivery Pressure") of one thousand (1000)

psig.



(d)



Subject to the provisions hereof, the Buyer

shall pay the Seller for each MMBTU of Gas

delivered hereunder, or for each MMBTU of

Gas for which the Buyer is obligated to pay

hereunder, a price calculated as follows:

The Base Price ("Base Price") in United

States Dollars (US$) per MMBTU is fixed on

the basis of ninety-nine percent (99%) of a

Low Sulfur Fuel Oil Basket ("LSFO Basket")

calculated as the average of the daily mean

value for low and high prices of fuel oil

taking into account equal parts of:

(1)



bulk residual fuel oil,

containing one percent (1%)

sulfur, quoted for barges at

Northwest Europe, (Barges, FOB

Rotterdam); and



(2)



bulk residual fuel oil,

containing one percent (1%)

sulfur, quoted for Mediterranean,



basis Italy, (Cargoes, FOB Med,

basis Italy); and

(3)



a theoretical blend of residual

fuel oil composed of Singapore

Cargoes made up of seventy-four

percent (74%) of LSWR-SR 0.3%,

(three-tenths percent (0.3%)

sulfur), and twenty-six percent

(26%) of HSFO 180, three and

one-half percent (3.5%) sulfur,

viscosity 180 centistokes.



The Base Price is calculated on the basis

of the arithmetic average of the monthly

values of the prices of the listed products

as published in Platt's Oilgram Price

Report for the eighteen (18) months of May,

1992 through October, 1993, inclusive.

(These values are derived from the mean of

the daily

66

ranges on days the postings are published

to give a monthly value.) For the purpose

of this Contract, Base Price will be equal

to $ 2.32/MMBTU.

The price of Gas for each MMBTU for each

Calendar Quarter thereafter shall be

determined by the following formula:

Price = Base Price x (A/B)

Where:

A



= a value calculated for the

HS/LSFO Basket, defined in this

Article 21.5.13 (d), evaluated for

the twelve (12) months preceding

the Calendar Quarter using the

method for averaging as described

for calculating the Base Price,

and



B



= A value calculated for the

HS/LSFO Basket, evaluate for the

twelve (12) months April 1993

through March 1994.



The High Sulfur/Low Sulfur Fuel Oil Basket

("HS/LSFO Basket") is valued as equal parts

of:

(1)



bulk residual fuel oil, containing

one percent (1%) sulphur, quoted

for Mediterranean, basis Italy,

(Cargoes, FOB Med, basis Italy);

and



(2)



bulk residual fuel oil, containing

one percent (1%) sulfur, quoted

for Northwest Europe Cargoes, CIF,

basis ARA, (Cargoes CIF NWE, Basis

ARA), and



(3)



bulk residual fuel oil, Singapore

Cargoes, containing three and

one-half percent (3.5%) sulfur,

viscosity 180 centistokes,

(Singapore HSFO, 180 cst), and



(4)



bulk residual fuel oil, Cargoes,



FOB Arab Gulf, viscosity 180

centistokes, (Arab Gulf, FOB HSFO

180 cst)

using the method for averaging as described

for calculating the Base Price.

The Floor Price ("Floor Price") shall be

ninety percent (90%) of the monthly values

of

67

the prices of the LSFO Basket as published

in Platt's Oilgram Price Report for the

eighteen (18) months of May, 1992 through

October, 1993, inclusive. (These values are

derived from the mean of the daily ranges

on days the postings are published to give

a monthly value.) For the purpose of this

Contract, Floor Price will be equal to $

2.11/MMBTU.

Notwithstanding results of the calculations

for price as shown in this Article 21.5.13

(d), the actual price shall in no event be

less than a Floor Price ("Floor Price")

which is calculated as US$2.11/MMBTU, nor

more than a Ceiling ("Ceiling") of the

Floor Price plus US$1.00/MMBTU, provided

that after seven (7) years from the

Effective Date, the Seller shall have the

option to revise the Ceiling to one hundred

fifty percent (150%) of ninety percent

(90%) of the same or equivalent basket of

fuel oils used in calculating the Base

Price averaged over the immediately

preceeding eighteen (18) months.

Parties agree to convert US$/barrel prices

for fuel oil as published in Platt's

Oilgram to US$/MMBTU using a factor of

6.28.

If Platt's Oilgram is no longer published,

an alternate publication shall be mutually

agreed upon.

(e)



21.5.14



Parties acknowledge that Gas is to be

eceived by GAIL at Hazira downstream of

separation and sweetening facilities owned

and operated by ONGC. In order to

compensate ONGC for cost of ownership and

operations of these facilities, Contractor

shall make payments to ONGC on the basis of

the costs fixed on an incremental basis by

an internationally recognised expert who

shall be selected by two members of the

Operating Committee from a panel of three

internationally recognised experts selected

by ONGC. In case there is no agreement

between the Companies and ONGC on the

advice tendered, the matter shall be

referred to Government. The decision of

Government shall be final and binding on

all the Parties.



Nothing contained in any contract entered into by

the Contractor for the supply, sale or disposal

68

of Gas, with any nominee of the Government shall



in any manner abrogate the obligation of the

Government contained herein.

21.5.15



The Government and/or its nominee shall pay any

and all sales tax payable on the sale of Gas to

the Government or its nominee.

69

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70



ARTICLE 22

EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY

22.1



Without prejudice to the right of the Contractor to select and

employ personnel in numbers and with the qualifications as, in the

opinion of the Contractor, are required for carrying out Petroleum

Operations in a safe, cost effective and efficient manner, the

Contractor shall, to the maximum extent reasonably possible,

employ, and require the Operator and Subcontractors to employ,

citizens of India having appropriate qualifications and experience,

taking into account the experience required and the level and

nature of the Petroleum Operations.



22.2



Contractor shall offer up to two (2) man months per year of

on-the-job training and practical experience in skilled, management

and executive positions of their ongoing Petroleum Operations to

Indian nationals of the Government's choice.



22.3



Contractor shall associate and involve mutually agreed numbers of

citizens of India designated by the Government, which shall in no

event exceed three (3) people at any one time, in the technological

aspects of the then ongoing Petroleum Operations for up to two man

months per year.

Such aspects shall include:

(a)



seismic data acquisition, processing and

interpretation;



(b)



computerized formation evaluation using well logs;



(c)



computerized analysis of geological data for basin

analysis;



(d)



laboratory core analysis;



(e)



reservoir simulation and modelling;



(f)



geochemistry, including analytical methods, source rock

studies, hydrocarbon generation, modelling;



(g)



measurement-while-drilling techniques;



(h)



stimulation of wells;



(i)



production engineering including, optimization methods

for surface and subsurface facilities (e.g. NODAL

analysis and implementation);



(j)



reservoir engineering and management including gas and

water injection;



(k)



enhanced oil recovery techniques;

71



(l)



gas production technology;



(m)



pipeline technology;



(n)



well design and drilling technology;



(o)



design of offshore facilities.



22.4



Except as herein provided, no Party shall be obliged to disclose by

virtue of this Article 22 any data, process or information, whether

owned by itself, any of its Affiliates or a third party, of a

proprietary nature.



22.5



At the request of the Government the Contractor shall separately

endeavour to negotiate, in good faith, technical assistance

agreements with the Government setting forth the terms by which

each constituent of the Contractor may render technical assistance

and make available commercially proven technical information of a

proprietary nature for use in India by the Government. The issues

to be addressed in negotiating such technical assistance agreements

shall include, but not be limited to, licensing issues, royalty

conditions, confidentiality restrictions, liabilities, costs and

method of payment.

72

ARTICLE 23

LOCAL GOODS AND SERVICES



23.1



In the conduct of Petroleum Operations, the Contractor

shall:

(a)



give preference to the purchase and use of goods

manufactured, produced or supplied in India provided that

such goods are available on terms equal to or better than

imported goods with respect to timing of delivery, quality

and quantity required, price and other terms;



(b)



employ Indian Subcontractors having the required skills

or expertise, to the extent reasonably possible, in so

far as their services are available on comparable

standards with those obtained elsewhere and at

competitive prices and on competitive terms; provided

that where no such Subcontractors are available,

preference shall be given to non-Indian Subcontractors

who utilise Indian goods to the maximum extent possible

subject however to the proviso in paragraph (a) above;



(c)



cooperate to the extent possible and without financial

obligation with domestic companies in India to enable them

to develop skills and technology to service the petroleum

industry;



(d)



ensure that provisions in terms of paragraphs (a) to

(c) above are contained in contracts between the

Operator and its Subcontractors.



23.2



The Contractor shall establish appropriate procedures, including

tender procedures, for the acquisition of goods and services which

shall ensure that suppliers and Subcontractors in India are given

adequate opportunity to compete for the supply of goods and

services. The tender procedures shall include, inter alia, the

financial amounts or value of contracts which will be awarded on

the basis of selective bidding or open competitive bidding, the

procedures for such bidding, and the exceptions to bidding in cases

of emergency.



23.3



Within one hundred and twenty (120) days after the end of each

Calendar Year, the Contractor shall provide the Government with a

report outlining its achievements in utilising Indian resources

during that Calendar Year.



23.4



In this Article "goods" means equipment, materials and

supplies.

73

ARTICLE 24

INSURANCE AND INDEMNIFICATION



24.1



INSURANCE

24.1.1



The Contractor shall, during the term of this



Contract, obtain and maintain insurance coverage

for and in relation to Petroleum Operations for

such amount and against such risks in accordance

with generally accepted international operating

practices as are set forth herein, and shall

furnish to the Government certificates evidencing

that such coverage is in effect. Such insurance

policies shall include the Government as

additional insured and shall waive subrogation

against the Government. The insurance shall,

without prejudice to the generality of the

foregoing, cover:



24.1.2



24.2



(a)



Loss or damage to all installations,

equipment and other assets for so long as

they are used in or in connection with

Petroleum Operations; provided, however, if

Contractor fails to insure any such

installation, equipment or assets, it shall

replace any loss thereof or repair any

damage caused thereto;



(b)



Loss, damage or injury caused by pollution

in the course of or as a result of

Petroleum Operations;



(c)



Loss or damage to property or bodily injury

suffered by any third party in the course

of or as a result of Petroleum Operations

for which the Contractor may be liable;



(d)



With respect to Petroleum Operations

offshore, the cost of removing wrecks and

cleaning up operations following any

accident in the course of or as a result of

Contractor's Petroleum Operations;



(e)



The Contractor's and/or Operator's

liability to its employees engaged in

Petroleum Operations.



The Contractor shall require its Subcontractors to

obtain and maintain insurance against the risks

referred to in Article 24.1.1 relating mutatis

mutandis to such Subcontractors.



INDEMNITY



74



The Contractor shall indemnify, defend and hold the Government

harmless against all 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.

24.3



ONGC shall indemnify and hold the Companies harmless against all

claims, losses and damages of any nature whatsoever, including, but

not by way of limitation, claims for loss or damage to property or

injury or death to persons or Environmental Damage caused by or

resulting from and attributable to any operations in the nature of

Petroleum Operations conducted by or on behalf of ONGC or failure

to comply with any Environmental Clearance(s) prior to the

Effective Date.

75

ARTICLE 25

RECORDS, REPORTS, ACCOUNTS AND AUDIT



25.1



The Contractor shall prepare and maintain at an office in India

accurate and current books, records, reports and accounts of its

activities for and in connection with Petroleum Operations so as to

present a fair, clear and accurate record of all its activities,

expenditures and receipts. The Contractor shall also keep

representative samples of cores and cuttings.



25.2



Based on generally accepted and recognised accounting principles

and modern petroleum industry practices, records, books, accounts

and accounting procedures in respect of Petroleum Operations shall

be maintained on behalf of the Contractor by the Operator, at its

business office in India.



25.3



The annual audit of accounts shall be carried out on behalf of the

Contractor by a qualified, independent firm of internationally

recognised chartered accountants, registered in India and selected

by the Contractor.



25.4



Accounts, together with the auditor's report thereon, shall be

submitted to the Parties for approval not later than the thirtieth

(30th) day of September following the Financial Year.



25.5



The Government shall have the right to audit the accounting records

of the Contractor in respect of Petroleum Operations as provided in

the Accounting Procedure.



25.6



The accounting and auditing provisions and procedures specified in

this Contract are without prejudice to any other requirements

imposed by any statute in India, including, without limitation, any

specific requirements of the statues relating to taxation of

companies.



25.7



For the purpose of any audit referred to in Article 25.5, the

Operator or the Contractor shall make available to the auditor all

such books, records, accounts and other documents and information

as may be reasonably required by the auditor during normal business

hours.

76

ARTICLE 26

INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY



26.1



The Contractor shall, promptly after they become available, make

available to the Government in its offices all data obtained as a

result of Petroleum Operations under the Contract including, but

not limited to, geological, geophysical, geochemical,

petrophysical, engineering, well logs, maps, magnetic tapes, cores

and production data as well as all interpretative and derivative

data, including reports, analyses, interpretations and evaluations

prepared in respect of Petroleum Operations (hereinafter referred

to as "Data"). Data shall be the property of the Government,

provided however, that the Contractor shall have the right to make

use of such Data, free of cost, for the purpose of Petroleum

Operations under this Contract as provided herein.



26.2



Contractor shall keep the Government currently advised of all

developments taking place during the course of Petroleum Operations

and shall furnish the Government with such progress reports

containing full and accurate information relating to Petroleum

Operations (on a periodic basis) as the Government may reasonably

require, provided that this obligation shall not extend to

proprietary technology. Without prejudice to the generality of the

foregoing, the Contractor shall submit regular statements and

reports relating to Petroleum Operations as provided in Appendix C.

Contractor shall meet with the Government at a mutually convenient

location to present the results of all geological and geophysical

work carried out as well as the results of all engineering and

drilling operations as soon as practical after such Data becomes

available to the Contractor.



26.3



All Data, information and reports obtained or prepared by, for or

on behalf of, the Contractor pursuant to this Contract shall be

treated as confidential and, subject to the provisions hereinbelow,

the Parties shall not disclose the contents thereof to any third

party without the consent in writing of the other Parties.



26.4



The obligation specified in Article 26.3 shall not operate

so as to prevent disclosure:

(a)



to Affiliates, Contractors, or Subcontractors for the

purpose of Petroleum Operations;



(b)



to employees, professional consultants, advisers, data

processing centres and laboratories, where required, for

the performance of functions in connection with Petroleum

Operations for any Party comprising the Contractor;



(c)



to banks or other financial institutions, in connection

with Petroleum Operations;

77



(d)



to bona fide intending assignees or transferees of an

interest hereunder of a Party comprising the Contractor

or in connection with a sale of stock of a Party

comprising the Contractor;



(e)



to the extent required by any applicable law or in

connection with any legal proceedings or by the

regulations of any stock exchange upon which the shares of

a Party comprising Contractor are quoted;



(f)



to Government departments for, or in connection with, the

preparation by or on behalf of the Government of

statistical reports with respect to Petroleum Operations,

or in connection with the administration of this Contract

or any relevant law or for any purpose connected with

Petroleum Operations;



(g)



by a Party with respect to any Data or information

which, without disclosure by such Party, is generally

known to the public.



26.5



Any Data, information or reports disclosed by the Parties

comprising the Contractor to any person other than pursuant to

Article 26.4 (a), (b) and (g) shall be disclosed on the terms that

such Data, information or reports shall be treated as confidential

by the recipient. Prompt notice of disclosures made by the

Contractor pursuant to Article 26.5 shall be given to the

Government.



26.6



Any Data, information and reports relating to the Contract Area,

which, in the opinion of the Government, might have significance in

connection with offers by the Government of open acreage or an

exploration programme to be conducted by a third party in another

area, may be disclosed by the Government for such purposes on

conditions to be agreed upon between the Government and the

Contractor.



26.7



Where an area ceases to be part of the Contract Area, the

Contractor shall continue to treat Data and information with

respect to the area as confidential and shall deliver to the

Government copies or originals of all Data and information in its

possession with respect to the area. The Government shall, however,

have the right to freely use the Data and information thereafter.



26.8



The Government shall, at all reasonable times, through duly

authorised representatives, be entitled to observe Petroleum

Operations and to inspect all assets, books, records, reports,

accounts, contracts, samples and Data kept by the Contractor or the

Operator in respect of Petroleum Operations under the Contract,

provided, however, that the Contractor shall not be required to

disclose any proprietary technology. The duly authorised

representatives shall be given reasonable assistance by the

Contractor for such functions and the Contractor shall afford such

78

representatives all facilities and privileges afforded to its own

personnel in the field including the use of office space and

housing, free of charge. The representatives shall be entitled to

make a reasonable number of surveys, measurements, drawings, tests

and copies of documents, take samples, and make a reasonable use of

the equipment and instruments of the Contractor provided that such

functions shall not unduly interfere with the Contractor's

Petroleum Operations.



26.9



Contractor shall give reasonable advance notice to the Government,

or to any other authority designated by the Government for such

purpose, of its programme of conducting surveys by aircraft or by

ships, indicating, inter alia, the name of the survey to be

conducted, approximate extent of the area to be covered, the

duration of the survey, the commencement date, and the name of the

airport or port from which the survey aircraft or ship will

commence its voyage.



26.10



The Government, or the authority designated by the Government for

such purpose, shall have the right to inspect any aircraft or ship

used by the Contractor or a Subcontractor carrying out any survey

or other operations in the Contract Area and shall have the right

to put on board such aircraft or ship Government officers in such

number as may reasonably be necessary to ensure compliance by the

Contractor or the Subcontractor with the security requirements of

India.



26.11



Expatriate employees and Subcontractors shall, for national

security purposes, be subject to the approval of the Government,

such approval not to be unreasonably withheld.

79

ARTICLE 27

TITLE TO PETROLEUM, DATA AND ASSETS



27.1



The Government is the sole owner of Petroleum underlying the

Contract Area and shall remain the sole owner of Petroleum produced

pursuant to the provisions of this Contract except that part of

Crude Oil or Gas the title whereof has passed to each constituent

of the Contractor or any other person in accordance with the

provisions of this Contract.



27.2



Title to Crude Oil and/or Gas to which each constituent of the

Contractor is entitled under this Contract, and title to Crude Oil

and/or Gas sold to Government or its nominee by the constituents of

the Contractor shall pass to the relevant Party, or as the case may

be, to Government or its nominee at the Delivery Point. Contractor

shall be responsible for all costs and risks prior to the Delivery

Point and each Party shall be responsible for all costs and risks

associated with such Party's share after the Delivery Point. Where

the Government or its nominee purchases all or some of the

Contractor's share of Crude Oil or Condensate, the Government or

its nominee shall be responsible for all costs and risks in respect

of the amount purchased, after the Delivery Point.



27.3



Title to all Data specified in Article 26 shall be vested in the

Government and the Contractor shall have the right of use thereof

as therein provided.



27.4



Assets in place or contracted for use in or on the Contract Area

purchased by the Contractor for use in Petroleum Operations shall

be owned by the Parties comprising Contractor in proportion to

their Participating Interest provided that the Government, or its

nominee, shall have the right to require vesting of full title and

ownership including abandonment obligations, if any, in it, free of

cost, charge and encumbrances, of any or all assets, whether fixed

or movable, acquired and owned by the Contractor for use in

Petroleum Operations inside or outside the Contract Area, except

assets required by a Party for ongoing operations in the nature of

Petroleum Operations in India, such right to be exercisable by the

Government, or its nominee, upon expiry or earlier termination of

the Contract.



27.5



Contractor shall be responsible in accordance with international

petroleum standards for proper maintenance, insurance and safety of

all assets acquired for Petroleum Operations for keeping them in

good repair, order and working condition at all times, and the

costs thereof shall be recoverable as Contract Costs in accordance

with Appendix C.



27.6



So long as this Contract remains in force, the Contractor shall,

free of any charge for the purpose of carrying out Petroleum



Operations hereunder, have the exclusive use of

80

the assets which have become or are the property of the Government

including, without limitation, those identified in Appendix F

except that the Sagar Laxmi shall be released to ONGC as soon as

alternate facilities are available, but not later than thirty (30)

months after the Effective Date unless agreed otherwise by the

Parties. During the period Contractor is using the Sagar Laxmi

Contractor shall pay to ONGC, as rental, a price to be based upon a

mutually agreed daily rate. The daily rate shall be determined in

accordance with competitive prices for like type of service. In the

event the daily rate cannot be mutually agreed upon it shall be

determined by an internationally recognized expert in the field

selected by two members of the Operating Committee from a group of

three internationally recognized experts selected by ONGC. If the

parties do not agree, the Government shall make the determination.

27.7



Equipment and assets no longer required for Petroleum Operations

shall first be offered free of cost, charge and encumbrance to the

Government, or its nominee, and, if not required by the Government,

or its nominee, will be so indicated in writing within thirty (30)

days of such offer. Failure to so indicate will be deemed to be a

rejection of the offer by the Government.



27.8



Assets not acquired by the Government, or its nominee, may

be sold or otherwise disposed of subject to the terms of

this Contract.

81

ARTICLE 28

ASSIGNMENT OF INTEREST



28.1



28.2



Subject to the terms of this Article and other terms of this

Contract, any Party comprising the Contractor may assign, or

transfer, a part or all of its Participating Interest, with the

prior written consent of the Government, which consent shall not be

unreasonably withheld, provided that the Government is satisfied

that:

(a)



the prospective assignee or transferee has the financial

standing, technical competence, capacity and ability to

meet its obligations hereunder, and is willing to provide

an unconditional undertaking to assume its Participating

Interest share of obligations and to provide a guarantee

in respect thereof as provided in the Contract.



(b)



the prospective assignee or transferee is not a company

incorporated in a country with which the Government,

for policy reasons, has restricted trade or business;



(c)



the prospective assignor or transferor and assignee or

transferee respectively are willing to comply with any

reasonable conditions of the Government as may be

necessary in the circumstances with a view to ensuring

performance under the Contract; and



(d)



the assignment or transfer will not adversely affect the

performance or obligations under this Contract or be

contrary to the interests of India.



An application by a Company for consent to assign or transfer shall

be accompanied by all relevant information concerning the proposed

assignment or transfer including detailed information on the

proposed assignee or transferee and its shareholding and corporate

structure, as was earlier required from the Companies constituting

the Contractor, the terms of the proposed assignment or transfer

and the unconditional undertaking referred to in Article 28.1(a)

above. The applicant shall also submit such information relating to

the prospective assignee or transferee of the assignment or

transfer as the Government may reasonably require to enable proper

consideration and disposal of the application.



28.3



No assignment or transfer shall be effective until the approval of

the Government is received, which approval may be given by the

Government on such terms as it may deem fit. Upon assignment or

transfer of its interest in this Contract, the assignor or

transferor shall be released and discharged from its obligations

hereunder only to the extent that such obligations are assumed by

the assignee or transferee with the approval of the Government.

82



28.4



The assignor shall clearly state in its deed of assignment, that

the assignee shall be liable for all future obligations, under the

Contract, to the extent of assignment.



28.5



Upon prior notice to the Contractor, the Government may assign or

transfer all or any part of its rights and interest under this

Contract to any Government company wholly or partly owned by the

Government and authorised by the Government to explore for and

exploit Petroleum in the Contract Area. Upon prior notice to the

Government, a Company may assign or transfer all or any part of its

rights and interest under this Contract to an Affiliate subject to

Article 6.2 and the parent company guarantee shall apply.



28.6



An assignment or transfer shall not be made so as to reduce the

Participating Interest of a constituent of the Contractor, at any

time, to less than ten percent (10%) of the total Participating

Interest of all the constituents of the Contractor, except where

the Government may, in special circumstances, so permit.



28.7



Nothing herein contained shall prohibit a Company in the normal

course of business from pledging its Participating Interest share

for purposes of financing, such as a mortgage, charge or

encumbrance on Petroleum assets or production of Petroleum at its

own risk, cost and responsibility. The Contractor shall provide the

Government with fifteen (15) days prior written notice before

entering into any such financing arrangements.



28.8



No assignment or pledge under this Article shall have the effect of

decreasing the benefits accruing to Government under this Contract

in any manner whatsoever.

83

ARTICLE 29

GUARANTEE



29.1



Each of the Companies shall deliver to the Government on

the Effective Date of this Contract:

(a)



a financial and performance guarantee, for the performance

of all obligations under the Contract, in the case of

EOGIL from a parent company of good financial standing

acceptable to the Government, in favour of the Government,

in the form and substance set out in Appendix E;



(b)



a legal opinion from its legal advisors, in a form

satisfactory to the Government, to the effect that the

aforesaid guarantee has been duly signed and delivered on

behalf of the guarantors with due authority and is legally

valid and enforceable and binding upon them.



29.2



If any of the documents referred to in Article 29.1 are not

delivered within the period specified herein, this Contract may be

cancelled by the Government upon ninety (90) days written notice of

its intention to do so.



29.3



Notwithstanding any change in the composition or shareholding of

the parent company furnishing the guarantees herein, it shall,

under no circumstances, be absolved of its obligations contained in

the guarantees provided pursuant to this Article.

84

ARTICLE 30

TERMINATION OF CONTRACT



30.1



This Contract may, subject to the provisions hereinbelow and

Article 31, be terminated by the Government without any financial

liability upon giving ninety (90) days written notice of its

intention to do so in the following circumstances, namely, that a

Company :

(a)



has knowingly submitted any false statement to the

Government in any manner which was a material

consideration in the execution of this Contract; or



(b)



has intentionally and knowingly extracted or authorised

the extraction of any mineral not authorised to be

extracted by the Contract or without the authority of

the Government except such extractions as may be

unavoidable as a result of operations conducted

hereunder in accordance with generally accepted

international petroleum industry practice which, when

so extracted, were immediately notified to the

Government; or



(c)



is adjudged bankrupt by a competent court or enters

into any agreement or scheme of composition with its

creditors or takes advantage of any law for the benefit

of debtors; or



(d)



has passed a resolution to apply to a competent court for

liquidation of the Company unless the liquidation is for

the purpose of amalgamation or reconstruction of which the

Government has been given notice and the Government is

satisfied that the Company's performance under this

Contract would not be adversely affected thereby and has

given its approval thereto; or



(e)



has assigned any interest in the Contract without the

prior consent of the Government as provided in

Article 28; or



(f)



fails to make any monetary payment required by law or

under this Contract by the due date or within the

specified period after the due date; or



(g)



fails to comply with or contravenes the provisions of

this Contract in a material particular; or



(h)



fails to comply with any final determination or award

made by a sole expert or arbitrators pursuant to

Article 33; or



(i)



has been served a notice of cancellation pursuant to

Article 29.2.



PROVIDED THAT

85

where the Contractor comprises two or more Companies, the

Government shall not exercise its rights of termination pursuant to

Article 30.1, on the occurrence, in relation to one or more, but

not all, of the Companies, of an event entitling the Government to

terminate the Contract, if any other Company or Companies

constituting the Contractor satisfies the Government that it, or

they, is/are willing and would be able to carry out the obligations

of the Contractor.

30.2



This Contract may also be terminated by the Government on giving

the requisite notice specified above if the events specified in

Article 30.1 (c) and (d) occur with respect to a company which has

given a guarantee pursuant to Article 29 subject, however, to

Article 30.3.



30.3



If the circumstances that give rise to the right of termination

under Article 30.1 (f) or (g) or Article 29.2 are remedied by the

Contractor within the ninety (90) day period or such extended

period as may be granted by the Government, following the notice of



the Government's intention to terminate the Contract as aforesaid,

such termination shall not become effective.

30.4



If the circumstance or circumstances that would otherwise result in

termination are the subject matter of proceedings under Article 33,

then termination shall not take place so long as such proceedings

continue and thereafter may only take place when and if consistent

with the arbitral award.



30.5



On termination of this Contract, for any reason whatsoever, the

rights and obligations of the Contractor shall cease but such

termination shall not affect any rights of any Party which may have

accrued or any obligations undertaken, or incurred, pursuant to

this Contract, by Government or the Contractor or any Party

comprising the Contractor and not discharged by the Contractor or

the Party prior to the date of termination.



30.6



In the event of termination pursuant to Articles 30.1 or

30.2:

(a)



the Government may require the Contractor, for a period

not exceeding one hundred and eighty (180) days from the

date of termination, to continue, for the account and at

the cost of the Government, Crude Oil or Natural Gas

production activities until the right to continue such

production has been transferred to another entity;



(b)



A Foreign Company, which is a constituent of the

Contractor, shall, subject to the provisions hereof, have

the right to remove and export all its property which has

not vested in the Government provided that in the event

that ownership of any property is in doubt,

86

or disputed, such property shall not be exported unless

and until the doubt or dispute has been settled in favour

of the Foreign Company.

87

ARTICLE 31

FORCE MAJEURE



31.1



Performance by any Party hereto of any of its obligations under

this Contract, or in fulfilling any condition of any lease granted

to such Party, or any lease issued thereunder, shall, except for

the payment of monies due under this Contract or under the Act and

the Rules or any law, be suspended or excused if, and to the extent

that, such non-performance or delay in performance is caused by

Force Majeure as defined in this Article.



31.2



For the purpose of this Contract, the term Force Majeure means any

cause or event, other than the unavailability of funds, whether

similar to or different from those enumerated herein, beyond the

reasonable control of, and unanticipated or unforeseeable by, and

not brought about at the instance of the Party claiming to be

affected by such event, or which, if anticipated or foreseeable,

could not be avoided or provided for, and which has caused the

non-performance or delay in performance. Without limitation to the

generality of the foregoing, the term Force Majeure shall include

natural phenomena or calamities, earthquakes, typhoons, fires, wars

declared or undeclared, hostilities, invasions, blockades, riots,

insurrection and civil disturbances.



31.3



Where a Party is claiming suspension of its obligations on account

of Force Majeure, it shall promptly, but in no case later than

seven (7) days after the occurrence of the event of Force Majeure,

notify the other Parties in writing giving full particulars of the

Force Majeure, the estimated duration thereof, the obligations

affected and the reasons for its suspension.



31.4



A Party claiming Force Majeure shall exercise reasonable diligence

to seek to overcome the Force Majeure event and to mitigate the



effects thereof on the performance of its obligations under this

Contract provided, however, that the settlement of strikes or

differences with employees shall be within the discretion of the

Party having the difficulty. The Party affected shall promptly

notify the other Parties as soon as the Force Majeure event has

been removed and no longer prevents it from complying with the

obligations which have been suspended and shall thereafter resume

compliance with such obligations as soon as possible. The period of

work commitment or this Contract may be extended by such additional

period as may be agreed by the Parties.

31.5



Notwithstanding anything contained herein, if an event of Force

Majeure occurs and is likely to continue for a period in excess of

thirty (30) days, the Parties shall meet to discuss the

consequences of the Force Majeure and the course of action to be

taken to mitigate the effects thereof or to be adopted in the

circumstances.

88

ARTICLE 32

APPLICABLE LAW AND LANGUAGE OF THE CONTRACT



32.1



Subject to the provisions of Article 33.12, this Contract

shall be governed and interpreted in accordance with the

laws of India.



32.2



Nothing in this Contract shall entitle the Government or the

Contractor to exercise the rights, privileges and powers conferred

upon it by this Contract in a manner which will contravene the laws

of India.



32.3



The English language shall be the language of this Contract and

shall be used in arbitral proceedings. All communication, hearings

or visual materials or documents relating to this Contract shall be

in English.

89

ARTICLE 33

SOLE EXPERT, CONCILIATION AND ARBITRATION



33.1



The Parties shall use their best efforts to settle amicably all

disputes, differences or claims arising out of or in connection

with any of the terms and conditions of this Contract or concerning

the interpretation or performance thereof.



33.2



Except for matters which, by the terms of this Contract, the

Parties have agreed to refer to a sole expert and any other matters

which the Parties may agree to so refer, any dispute, difference or

claim arising between the Parties hereunder which cannot be settled

amicably may be submitted by any Party to arbitration pursuant to

Article 33.3. Such sole expert shall be an independent and

impartial person of international standing with relevant

qualifications and experience appointed by agreement between the

Parties. Any sole expert appointed shall be acting as an expert and

not as an arbitrator and the decision of the sole expert on matters

referred to him shall be final and binding on the Parties and not

subject to arbitration. If the Parties are unable to agree on a

sole expert, the disputed subject matter may be referred to

arbitration.



33.3



Subject to the provisions herein, any unresolved dispute,

difference or claim which cannot be settled amicably within a

reasonable time may, except for those referred to in Article 33.2,

be submitted to an arbitral tribunal for final decision as

hereinafter provided.



33.4



The arbitral tribunal shall consist of three arbitrators. The Party

or Parties instituting the arbitration shall appoint one arbitrator

and the Party or Parties responding shall appoint another

arbitrator and both Parties shall so advise the other Parties. The

two arbitrators appointed by the Parties shall appoint the third

arbitrator.



33.5



Any Party may, after appointing an arbitrator, request the other



Party(ies) in writing to appoint the second arbitrator. If such

other Party fails to appoint an arbitrator within forty-five (45)

days of receipt of the written request to do so, such arbitrator

may, at the request of the first Party, be appointed by the

Secretary General of the Permanent Court of Arbitration at the

Hague, within forty-five (45) days of the date of receipt of such

request, from amongst persons who are not nationals of the country

of any of the Parties to the arbitration proceedings.

33.6



If the two arbitrators appointed by the Parties fail to agree on

the appointment of the third arbitrator within thirty (30) days of

the appointment of the second arbitrator and if the Parties do not

otherwise agree, the Secretary General of the Permanent Court of

Arbitration at the Hague

90

may, at the request of either Party and in consultation with both,

appoint the third arbitrator who shall not be a national of the

country of any Party.



33.7



If any of the arbitrators fails or is unable to act, his successor

shall be appointed in the manner set out in this Article as if he

was the first appointment.



33.8



The decision of the arbitration tribunal and, in the case of

difference among the arbitrators, the decision of the majority,

shall be final and binding upon the Parties.



33.9



Arbitration proceedings shall be conducted in accordance with the

arbitration rules of the United Nations Commission on International

Trade Law (UNCITRAL) of 1985 except that in the event of any

conflict between these rules and the provisions of this Article 33,

the provisions of this Article 33 shall govern.



33.10



The right to arbitrate disputes and claims under this Contract

shall survive the termination of this Contract.



33.11



Prior to submitting a dispute to arbitration, a Party may submit

the matter for conciliation under the UNCITRAL conciliation rules

by mutual agreement of the Parties. If the Parties fail to agree on

a conciliator (or conciliators) in accordance with the rules, the

matter may be submitted for arbitration. No arbitration proceedings

shall be instituted while conciliation proceedings are pending and

such proceedings shall be concluded within sixty (60) days.



33.12



The venue of conciliation or arbitration proceedings pursuant to

this Article, unless the Parties otherwise agree, shall be London,

England and shall be conducted in the English language. The

arbitration agreement contained in this Article 33 shall be

governed by the laws of England. Insofar as practicable, the

Parties shall continue to implement the terms of this Contract

notwithstanding the initiation of arbitral proceedings and any

pending claim or dispute.



33.13



The fees and expenses of a sole expert or conciliator appointed by

the Parties shall be borne equally by the Parties. Assessment of

the costs of arbitration including incidental expenses and

liability for the payment thereof shall be at the discretion of the

arbitrators.

91

ARTICLE 34

ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS



34.1



This Contract supersedes and replaces any previous agreement or

understanding between the Parties, whether oral or written, on the

subject matter hereof, prior to the Effective Date of this

Contract.



34.2



This Contract shall not be amended, modified, varied or

supplemented in any respect except by an instrument in writing

signed by all the Parties, which shall state the date upon which

the amendment or modification shall become effective.



34.3



No waiver by any Party of any one or more obligations or defaults



by any other Party in the performance of this Contract shall

operate or be construed as a waiver of any other obligations or

defaults whether of a like or of a different character.

34.4



The provisions of this Contract shall inure to the benefit of and

be binding upon the Parties and their permitted assigns and

successors in interest.



34.5



In the event of any conflict between any provisions in the main

body of this Contract and any provision in the Appendices, the

provision in the main body shall prevail.



34.6



The headings of this Contract are for convenience of reference only

and shall not be taken into account in interpreting the terms of

this Contract.

92

ARTICLE 35

CERTIFICATES



35.1



A Company shall furnish, prior to execution of this Contract, a

duly authorised copy of a resolution properly and legally passed by

the Board of Directors of the Company specifying the person

authorised to execute this Contract along with a Certificate duly

signed by the Secretary or an Assistant Secretary of the Company

under its seal in this regard and to the effect that the Company

has the power and authority to enter into this Contract and to

perform its obligations thereunder and has taken all necessary

action to authorise the execution, delivery and performance of the

Contract.

93

ARTICLE 36

NOTICES



36.1



All notices, statements, and other communications to be given,

submitted or made hereunder by any Party to another shall be

sufficiently given if given in writing in the English language and

sent by registered post, postage paid, or by telegram, telex,

facsimile, radio or cable, to the address or addresses of the other

Party or Parties as follows:

a)



To the President of India through the

Secretary to the Government of India

Ministry of Petroleum and Natural Gas

Shastri Bhavan

Dr. Rajendra Prasad Marg

New Delhi 110 001, India

Attention: Joint Secretary

Facsimile No. : 91-11-384-787



b)



The Secretary

Oil & Natural Gas Corporation Limited

Tower II, 8th Floor, Jeevan Bharati

124 Connaught Circus

New Delhi 110 001, India

Facsimile No. : 91-11-331-6413



c)



Reliance Industries Limited

Maker Chambers IV, 3rd Floor

222 Nariman Point

Bombay 400 021 INDIA

Attention: Chief Executive Officer Oil & Gas

Facsimile No. :

022-204-2268



d)



Enron Oil & Gas India Ltd.

Amiya Apartments, 1st Floor

63A Linking Road, Santa Cruz (W)

Bombay 400 054 INDIA

Attention: Managing Director

Facsimile No.:

011-91-22-604-9119

with a copy to:

Enron Oil & Gas India Ltd.

1400 Smith Street



Houston, Texas 77002, U.S.A.

Attention: Vice President, Operations

Facsimile No. :

713-646-8115

36.2



Notices when given in terms of Article 36.1 shall be effective when

delivered if offered at the address of the other Parties as under

Article 36.1 during business hours on working days and, if received

outside business hours, on the next following working day.



36.3



Any Party may, by reasonable notice as provided hereunder to

94

the other Parties, change its address and other particulars

for notice purpose.



IN WITNESS WHEREOF, the representatives of the Parties to

this Contract being duly authorised have hereunto set their hands

and have executed these presents this 22 day of December 1994.

Signed for and on

behalf of the

President of India



By NAJERB JR.

In the presence of

V. RAMANI



Signed for and on behalf

of Oil & Natural Gas

Corporation Limited



By S. K. MANGLIK

In the presence of

R. N. DESAI



Signed for and on behalf

of Reliance Industries

Limited



By AKHIL GUPTA

In the presence of

Ba La SAGRAMANIA



Signed for and on behalf

of Enron Oil & Gas India Ltd.



By J. A. KOPECKY

In the presence of

E. J. VANDERMARK

95







DESCRIPTION OF CONTRACT AREA



APPENDIX A



The area comprising approximately 430 sq. km offshore India identified as

Panna Block and the area comprising approximately 777 sq. km offshore India

identified as the Mukta Block described herein and shown under map attached as

Appendix B-1 and B- 2.

Longitude and Latitude measurements are as follows:

MUKTA (about 100 km Northwest of Bombay) See Appendix B-2.

A.

B.

C.

D.



LATITUDE

19 degrees 27'00"N

19 degrees 27'00"N

19 degrees 12'00"N

19 degrees 12'00"N



LONGITUDE

71 degrees 38'00"E

71 degrees 54'00"E

71 degrees 54'00"E

71 degrees 38'00"E



PANNA (about 95 km Northwest of Bombay) See Appendix B-1.

LATITUDE

A.

B.

C.

D.

E.



19(degree)28'00"N

19(degree)28'00"N

19(degree)19'30"N

19(degree)15'00"N

19(degree)15'00"N



LONGITUDE

71(degree)54'00"E

72(degree)05'00"E

72(degree)05'00"E

72(degree)00'00"E

71(degree)54'00"E



96



WESTERN INDIA OFFSHORE

BOMBAY BASIN



WESTERN INDIA OFFSHORE

BOMBAY BASIN





97A



APPENDIX B-1

MAP OF CONTRACT AREA

PANNA BLOCK



APPENDIX B-2

MAP OF CONTRACT AREA

MUKTA BLOCK



97B

ACCOUNTING PROCEDURE



APPENDIX C



TO

PRODUCTION SHARING CONTRACT

BETWEEN

THE GOVERNMENT OF INDIA

AND

ONGC/RIL/EOGIL

98

TABLE OF CONTENTS

SECTIONS

SECTION 1:



CONTENT



1.5

1.6

1.7

1.8

1.9

1.10



GENERAL PROVISIONS

Purpose

Definitions

Inconsistency

Documentation and Statements to be Submitted by

the Contractor

Language and Units of Account

Currency Exchange Rates

Payments

Arms Length Transactions

Audit and Inspection Rights of the Government

Revision of Accounting Procedure



2.1

2.2

2.3

2.4

2.5

2.6



CLASSIFICATION, DEFINITION AND ALLOCATION OF

COSTS AND EXPENDITURES

Segregation of Costs

Exploration Costs

Development Costs

Production Costs

Service Costs

General and Administrative Costs



1.1

1.2

1.3

1.4



SECTION 2:



SECTION 3:

3.1



COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL

INCOME OF THE CONTRACTOR

Costs Recoverable and Allowable Without Further

Approval of the Government

3.1.1

Surface Rights

3.1.2

Labor & Associated Costs

3.1.3

Transportation Costs

3.1.4

Charges for Services

(a) Third Party Contracts

(b) Affiliated Company Contracts

3.1.5

Communications

3.1.6

Office, Shore Bases and

Miscellaneous Facilities

3.1.7

Environmental Studies and Protection

3.1.8

Materials and Equipment

(a) General



(b) Warranty

(c) Value of Materials Charged to

the Account

3.1.9

Duties, Fees and Other Charges

3.1.10

Insurance and Losses

3.1.11

Legal Expenses

3.1.12

Training Costs

3.1.13

General and Administrative Costs

Costs Not Recoverable and Not Allowable under the

Contract

Other Costs Recoverable and Allowable

Incidental Income and Credits

Non-Duplication of Charges and Credits



3.2

3.3

3.4

3.5



99

SECTION 4:



RECORDS AND INVENTORIES OF ASSETS

Records

Inventories



4.1

4.2



SECTION 5:



PRODUCTION STATEMENT AND ROYALTY AND CESS

STATEMENT



SECTION 6:



VALUE OF PRODUCTION AND PRICING STATEMENT



SECTION 7:



STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS



SECTION 8:



COST RECOVERY STATEMENT



SECTION 9:



PRODUCTION SHARING STATEMENT



SECTION 10:



END OF YEAR STATEMENT



SECTION 11:



BUDGET STATEMENT

100

ACCOUNTING PROCEDURE

SECTION 1

GENERAL PROVISIONS



1.1



PURPOSE

Generally, the purpose of this Accounting Procedure is to set out

principles and procedures of accounting which will enable the

Government of India to monitor effectively the Contractor's costs,

expenditures, production and income so that the Government's

entitlement to Profit Petroleum, royalty, cess, etc., as well as

Contractor's entitlement to Cost Petroleum and Profit Petroleum can

be accurately determined pursuant to the terms of the Contract.

More specifically, the purpose of the Accounting Procedure is to:

-



classify costs and expenditures and to define which

costs and expenditures shall be allowable for cost

recovery, production sharing and participation

purposes;



-



specify the manner in which the Contractor's accounts

shall be prepared and approved.



This Accounting Procedure is intended to apply to the provisions of

the Contract and is without prejudice to the computation of income

tax under applicable provisions of the Income Tax Act, 1961, as

amended.

1.2



DEFINITIONS

For purposes of this Accounting Procedure, the terms used herein

which are defined in the Contract shall have the same meaning when

used in this Accounting Procedure.



1.3



INCONSISTENCY

In the event of any inconsistency or conflict between the

provisions of this Accounting Procedure and the other provisions of



the Contract, the other provisions of the Contract shall prevail.

1.4



DOCUMENTATION AND STATEMENTS TO BE SUBMITTED BY THE

CONTRACTOR

1.4.1



Within thirty (30) days of the Effective Date of

the Contract, the Contractor shall submit to and

discuss with the Government a proposed outline of

charts of accounts, operating records and

reports, which outline shall reflect each of the

categories and sub-categories of costs and income

specified in Sections 2 and 3 and shall be in

accordance with generally accepted standards and

recognized accounting systems and consistent with

normal petroleum industry practice and procedures

101

for joint venture operations.

Within ninety (90) days of receiving the above

submission, the Government shall either provide

written notification of its approval of the

proposal or request, in writing, revisions to the

proposal.

Within one hundred and eighty (180) days from the

Effective Date of the Contract, the Contractor and

the Government shall agree on the outline of

charts of accounts, records and reports which

shall also describe the basis of the accounting

system and procedures to be developed and used

under this Contract. Following such agreement, the

Contractor shall expeditiously prepare and provide

the Government with formal copies of the

comprehensive charts of accounts, records and

reports and allow the Government to examine the

manuals and to review procedures which are, and

shall be, observed under the Contract.



1.4.2



1.4.3



Notwithstanding the generality of the foregoing,

the Contractor shall make regular Statements

relating to the Petroleum Operations as follows :

(i)



Production Statement and Royalty and

Cess Statement (see Section 5 of this

Accounting Procedure)



(ii)



Value of Production and Pricing

Statement (see Section 6 of this

Accounting Procedure)



(iii)



Statement of Costs, Expenditures and

Receipts (see Section 7 of this

Accounting Procedure)



(iv)



Cost Recovery Statement (see Section 8

of this Accounting Procedure)



(v)



Production Sharing Statement (see

Section 9 of this Accounting Procedure)



(vi)



End of Year Statement (see Section 10

of this Accounting Procedure)



(vii)



Budget Statement (see Section 11 of

this Accounting Procedure)



All reports and statements shall be prepared in

accordance with the Contract and the laws of India

and, where there are no relevant provisions in

either of these, in accordance with generally

accepted practices in the international petroleum

102



industry.

1.4.4



1.5



Each of the entities constituting the Contractor

shall be responsible for maintaining its own

accounting records in order to comply with all

legal requirements and to support all returns or

any other accounting reports required by any

Government authority in relation to the Petroleum

Operations. However, for the purposes of giving

effect to this Accounting Procedure, the

Contractor shall appoint, and notify the

Government in writing thereof, one of the Parties

constituting Contractor who shall be responsible

for maintaining, at its business office in India,

on behalf of the Contractor, all the accounts of

the Petroleum Operations in accordance with the

provisions of the Accounting Procedure and the

Contract.



LANGUAGE AND UNITS OF ACCOUNT

All accounts, records, books, reports and statements shall be

maintained on an accrual basis and prepared in the English

language. The accounts shall be maintained in United States

Dollars, which shall be the controlling currency of account for

cost recovery, production sharing and participation purposes.

Metric units and Barrels shall be employed for measurements

required under the Contract. Where necessary for clarification, the

Contractor may also maintain accounts and records in other

languages, currencies and units. Following any new discovery of

Petroleum the Parties shall meet to establish specific principles

and procedures for identifying all costs, expenditures, receipts

and income with respect to the Contract Area.



1.6



CURRENCY EXCHANGE RATES

1.6.1



1.6.2



For translation purposes between United States

Dollars and Indian Rupees or any other currency,

the previous month's average of the daily means

of the buying and selling rates of exchange as

quoted by the State Bank of India (or any other

financial body as may be mutually agreed between

the Parties) shall be used for the month in which

the revenues, costs, expenditures, receipts or

income are recorded. However, in the case of any

single non-US Dollar transaction in excess of the

equivalent of one hundred thousand US Dollars

(US$100,000), the conversion into US Dollars

shall be performed on the basis of the average of

the applicable exchange rates for the day on

which the transaction occurred.

Any realized or unrealized gains or losses from

the exchange of currency in respect of Petroleum

Operations shall be credited or charged to the

accounts. A record of the exchange rates used in

converting Indian Rupees or any other currencies

103

into United States Dollars as specified in Section

1.6.1 shall be maintained by the Contractor and

shall be identified in the relevant statements

required to be submitted by the Contractor in

accordance with Section 1.4.2.



1.7



PAYMENTS

1.7.1



Subject to the foreign exchange laws and

regulations prevailing from time to time, all

payments between the Parties shall, unless

otherwise agreed, be in United States Dollars and

shall be made through a bank designated by each

receiving Party.



1.8



1.7.2



Unless otherwise specified, all sums due under the

Contract shall be paid within forty-five (45) days

from the date on which the obligation to pay was

incurred.



1.7.3



Unless otherwise specified, all sums due by one

Party to the other under the Contract during any

month shall, for each day such sums are overdue

during such month, bear interest compounded daily

at the applicable LIBOR plus one percentage (1%)

point.



ARMS LENGTH TRANSACTIONS

Unless otherwise specifically provided for in the Contract, all

transactions giving rise to revenues, costs or expenditures which

will be credited or charged to the accounts prepared, maintained or

submitted hereunder shall be conducted at arms length or on such a

basis as will assure that all such revenues, costs or expenditures

will be equal to or better than, as the case may be, would result

from a transaction conducted at arms length on a competitive basis

with third parties. For the purposes of clarification, this means

revenues would be equal to or higher and costs would be equal to or

lower.



1.9



AUDIT AND INSPECTION RIGHTS OF THE GOVERNMENT

1.9.1



Without prejudice to statutory rights, the

Government, upon at least ninety (90) days

advance written notice to the Contractor, shall

have the right to inspect and audit, during

normal business hours , all records and documents

supporting costs, expenditures, expenses,

receipts and income, such as Contractor's

accounts, books, records, invoices, cash

vouchers, debit notes, price lists or similar

documentation with respect to the Petroleum

Operations conducted hereunder in each Financial

Year, within two (2) years (or such longer period

104

as may be required in exceptional circumstances)

from the end of such Financial Year.



1.9.2



The Government may undertake the conduct of the

audit either through its own representatives or

through a qualified firm of recognized

international chartered accountants, registered in

India, appointed for the purpose by the

Government.



1.9.3



In conducting the audit, the Government or its

auditors shall be entitled to examine and verify,

at reasonable times, all charges and credits

relating to Contractor's activities under the

Contract and all books of account, accounting

entries, material records and inventories,

vouchers, payrolls, invoices and any other

documents, correspondence and records considered

necessary by the Government to audit and verify

the charges and credits. The auditors shall also

have the right, in connection with such audit, to

visit and inspect, at reasonable times, all

sites, plants, facilities, warehouses and offices

of the Contractor directly or indirectly serving

the Petroleum Operations, and to physically

examine other property, facilities and stocks

used in Petroleum Operations, wherever located

and to question personnel associated with those

operations. Where the Government requires

verification of charges made by an Affiliate, the

Government shall have the right to obtain an

audit certificate from an internationally

recognized firm of public accountants acceptable



to both the Government and the Contractor, which

may be the Contractor's statutory auditor. Any

and all such costs shall be for the Government's

account.

1.9.4



Any audit exceptions shall be made by the

Government in writing and notified to the

Contractor within one hundred and twenty (120)

days following completion of the audit in

question.



1.9.5



The Contractor shall answer any notice of

exception under Section 1.9.4 within one hundred

and twenty (120) days of the receipt of such

notice. Where the Contractor has, after the one

hundred and twenty (120) days, failed to answer a

notice of exception, the exception shall prevail.



1.9.6



All agreed adjustments resulting from an audit and

all adjustments required by prevailing exceptions

shall be promptly made in the Contractor's

accounts and any consequential

105

adjustments to the Government's entitlement to

Petroleum shall be made as promptly as

practicable.



1.9.7



1.10



If the Contractor and the Government are unable

to reach final agreement on proposed audit

adjustments, either Party may refer any dispute

thereon to a sole expert as provided for in the

Contract. So long as any issues are outstanding

with respect to an audit, the Contractor shall

maintain the relevant documents and permit

inspection thereof until the issue is resolved.



REVISION OF THE ACCOUNTING PROCEDURE

1.10.1



By mutual agreement between the Government and the

Contractor, this Accounting Procedure may be

revised from time to time, in writing, signed by

the Parties, stating the date upon which the

amendments shall become effective.

106



SECTION 2

CLASSIFICATION, DEFINITION AND ALLOCATION

OF COSTS AND EXPENDITURES

2.1



SEGREGATION OF COSTS

Costs shall be segregated in accordance with the purposes for which

such expenditures are made. All costs and expenditures allowable

under Section 3, relating to Petroleum Operations, shall be

classified, defined and allocated as set out below in this Section.

Expenditure records shall be maintained in such a way as to enable

proper allocation.



2.2



EXPLORATION COSTS

Exploration Costs are all direct and allocated indirect

expenditures incurred in the search for Petroleum in an area which

is, or was at the time when such costs were incurred, part of the

Contract Area, including expenditures incurred in respect of:

2.2.1



Aerial, geophysical, geochemical,

palaeontological, geological, topographical and

seismic surveys, analyses and studies and their

interpretation.



2.2.2



Core hole drilling and water well drilling.



2.2.3



Labor, materials, supplies and services used in

drilling Wells with the object of finding

Petroleum or in drilling Appraisal Wells provided

that if such Wells are completed as producing

Wells, the costs of completion thereof shall be

classified as Development Costs.



2.2.4



Facilities used solely in support of the purposes

described in Sections 2.2.1, 2.2.2 and 2.2.3

above, including access roads, all separately

identified.



2.2.5



Any Service Costs and General and Administrative

Costs directly incurred on exploration activities

and identifiable as such and a portion of the

remaining Service Costs and General and

Administrative Costs allocated to Exploration

Operations determined by the proportionate share

of total Contract Costs (excluding General and

Administrative Costs and Service Costs) represented by all other Exploration Costs.



2.2.6



Geological and geophysical information purchased

or acquired in connection with Exploration

Operations.

107



2.2.7

2.3



Any other expenditure incurred in the search for

Petroleum not covered under Sections 2.3 or 2.4.



DEVELOPMENT COSTS

Development Costs are all direct and allocated indirect

expenditures incurred with respect to the development of the

Contract Area including expenditures incurred on account of:



2.4



2.3.1



Drilling Development Wells, whether these Wells

are dry or producing and drilling Wells for the

injection of water or Gas to enhance recovery of

Petroleum and Recompletion or working over of

existing or service wells.



2.3.2



Purchase, installation or construction of

production, transport and storage facilities for

production of Petroleum from a Field, such as

pipelines, flow lines, production and treatment

units, wellhead equipment, subsurface equipment,

enhanced recovery systems, offshore and onshore

platforms, export terminals and piers, harbours

and related facilities and access roads for

production activities.



2.3.3



Engineering and design studies for facilities

referred to in Section 2.3.2.



2.3.4



Any Service Costs, joint Development Plans and

General and Administrative Costs directly

incurred in Development Operations and

identifiable as such and a portion of the

remaining Service Costs and General and

Administrative Costs allocated to development

activities, determined by the proportionate share

of total Contract Costs (excluding General and

Administrative Costs and Service Costs) represented by all other Development Costs.



PRODUCTION COSTS

2.4.1



Production Costs are expenditures incurred on

Production Operations in respect of the Contract

Area after the start of production from the Field

(which are other than Exploration and Development

Costs). The balance of General and Administrative Costs and Service Costs not allocated to



Exploration Costs or Development Costs shall be

allocated to Production Costs.

2.4.2



Production Costs shall include costs for

completion of Exploration Wells by way of

installation of casing or equipment or otherwise

or for the purpose of bringing a Well into use as

a producing Well or as a Well for the injection

108

of water or Gas to enhance recovery of Petroleum

and Recompletion or working over of existing or

service wells.



2.5



SERVICE COSTS

Service Costs are direct and indirect expenditures incurred in

support of Petroleum Operations in the Contract Area, including

expenditures on insurance, environmental protection, warehouses,

piers, marine vessels, vehicles, motorized rolling equipment,

aircraft, fire and security stations, workshops, water and sewerage

plants, power plants, housing, community and recreational

facilities and furniture and tools and equipment used in these

activities. Service Costs in any Year shall include the costs

incurred in such Year to purchase and/or construct the facilities

as well as the annual costs of maintaining and operating the same,

each to be identified separately. All Service Costs shall be

regularly allocated as specified in Sections 2.2.5, 2.3.4 and 2.4

to Exploration Costs, Development Costs and Production Costs and

shall be separately shown under each of these categories. Where

Service Costs are made in respect of shared facilities, the basis

of allocation of costs to Petroleum Operations hereunder shall be

on the basis of gross expenditures.



2.6



GENERAL AND ADMINISTRATIVE COSTS

General and Administrative Costs are expenditures incurred on

general administration and management primarily and principally

related to Petroleum Operations in or in connection with the

Contract Area, and shall include:

2.6.1



main office, field office and general

administrative expenditures in India, including

supervisory, accounting and employee relations

services;



2.6.2



an annual overhead charge for services rendered

by the parent company or an Affiliate of the

Operator outside India to support and manage

Petroleum Operations under the Contract, and for

staff advice and assistance including financial,

legal, accounting and employee relations

services, but excluding any remuneration for

services charged separately under this Accounting

Procedure calculated on the basis of one percent

(1%) of expenditures.



2.6.3



The expenditures used to calculate the monthly

indirect charge shall not include the indirect

charge (calculated either as a percentage of

expenditures or as a minimum monthly charge),

rentals on surface rights acquired and maintained

for the joint account, guarantee deposits,

109

concession acquisition costs, bonuses paid in

accordance with the Contract, royalties, value

added taxes and taxes paid under the Contract,

settlement of claims, proceeds from the sale of

assets (including division in kind) amounting to

more than US$10,000 per transaction, and similar

items mutually agreed upon by the parties.



Credits arising from any government subsidy

payment and disposition of joint account property

shall not be deducted from total expenditures in

determining such charge.

2.6.4



The indirect charges provided for in this Section

may be amended periodically by mutual agreement

between the Parties if, in practice, these charges

are found to be insufficient or

excessive.

110



SECTION 3

COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL

INCOME OF THE CONTRACTOR

3.1



COSTS RECOVERABLE AND ALLOWABLE WITHOUT FURTHER APPROVAL OF

THE GOVERNMENT.

Costs incurred by the Contractor on Petroleum Operations pursuant

to the Contract as classified under the headings referred to in

Section 2 shall be allowable for the purposes of the Contract

except to the extent provided in Section 3.2 or elsewhere in this

Accounting Procedure, and subject to audit as provided for herein.

3.1.1



Surface Rights

All direct costs necessary for the acquisition,

renewal or relinquishment of surface rights

acquired and maintained in force for the purposes

of the Contract except as provided in Section

3.1.9. Why expected? How applicable?



3.1.2



Labor and Associated Costs

(a)



Costs of all Contractor's locally recruited

employees who are directly engaged in the

conduct of Petroleum Operations under the

Contract in India. Such costs shall include

the costs of employee benefits and

Government benefits for employees and

levies imposed on the Contractor as an

employer, transportation and relocation

costs within India of the employee and such

members of the employee's family (limited

to spouse and dependent children) as

required by law or customary practice in

India. If such employees are engaged in

other activities in India, in addition to

Petroleum Operations, the cost of such

employees shall be apportioned on a time

sheet basis according to sound and

acceptable accounting principles.



(b)



Assigned Personnel

Costs of salaries and wages, including

bonuses, of the Contractor's employees

directly and necessarily engaged in the

conduct of the Petroleum Operations under

the Contract, whether temporarily or

permanently assigned, irrespective of the

location of such employees, it being

understood that in the case of those

personnel only a portion of whose time is

wholly dedicated to Petroleum Operations

under the Contract, only that pro rata

portion of applicable salaries, wages

111

and other costs, as specified in Sections

3.1.2(c), (d), (e)and (f) shall be charged

and the basis of such pro rata allocation



shall be specified.

(c)



Expenses or contributions made pursuant to

assessments or obligations imposed under

the laws of India which are applicable to

the Contractor's cost of salaries and

wages.



(d)



The Contractor's cost of established plans

for employees' group life insurance,

hospitalization, pension, retirement and

other benefit plans of a like nature

customarily granted to the Contractor's

employees provided, however, that such

costs are in accordance with generally

accepted standards in the international

petroleum industry, applicable to salaries

and wages chargeable to Petroleum

Operations under Section 3.1.2(b) above.



(e)



Personal Income taxes where and when they

are paid by the Contractor to the

Government of India for the employee, in

accordance with the Contractor's standard

personnel policies.



(f)



Reasonable transportation and travel

expenses of employees of the Contractor,

including those made for travel and

relocation of the expatriate employees,

including their dependent family and

personal effects, assigned to India whose

salaries and wages are chargeable to

Petroleum Operations under Section

3.1.2(b). Actual transportation expenses of

personnel transferred to Petroleum

Operations from their country of origin

and/or relocation to their country of

origin shall be charged to the Petroleum

Operations. Where such transfer or

relocation is to or from a country other

than the country of origin there shall be

no reimbursement.



Transportation cost as used in this Section shall

mean the cost of freight and passenger service and

any accountable incidental expenditures related to

transfer travel and authorized under Contractor's

standard personnel policies. Contractor shall

ensure that all expenditures related to

transportation costs are equitably allocated to

the activities which have benefited from the

personnel concerned.

112

3.1.3



Transportation Costs

The reasonable cost of transportation of

equipment, materials and supplies within India and

from outside India to India necessary for the

conduct of Petroleum Operations under the

Contract, including, but not limited to, directly

related costs such as unloading charges, dock fees

and inland and ocean freight charges.



3.1.4



Charges for Services

(a)



Third Party Contracts

The actual costs of contract services,

services of professional consultants,

utilities and other services necessary for

the conduct of Petroleum Operations under

the Contract performed by third parties



other than an Affiliate of the Contractor,

provided that the transactions resulting in

such costs are undertaken pursuant to

Section 1.8 of this Accounting Procedure.

(b)



Affiliated Company Contracts

(i)



Professional and Administrative

Services and Expenses

Cost of professional and

administrative services provided

by any Affiliate for the direct

benefit of Petroleum Operations,

including, but not limited to,

services provided by the

production, exploration, legal,

financial, insurance, accounting

and computer services divisions

other than those covered by

Section 3.1.4(b)(ii) which

Contractor may use in lieu of

having its own employees.

Charges shall be equal to the

actual cost of providing their

services, shall not include any

element of profit and shall not

be any higher than the most

favorable prices charged by the

Affiliate to third parties for

comparable services under

similar terms and conditions

elsewhere and will be fair and

reasonable in the light of

prevailing international

petroleum industry practice and

experience.



113

(ii)



Scientific or Technical

Personnel

Cost of scientific or technical

personnel services provided by

any Affiliate of Contractor for

the direct benefit of Petroleum

Operations, which cost shall be

charged on a cost of service

basis. Charges therefor shall

not exceed charges for

comparable services currently

provided by outside technical

service organizations of

comparable qualifications.

Unless the work to be done by

such personnel is covered by an

approved Work Programme and

Budget, Operator shall not

authorize work by such personnel

without approval of the

Management Committee.



(c)



Equipment, facilities and property owned

and furnished by the Contractor's

Affiliates, at rates commensurate with the

cost of ownership and operation provided,

however, that such rates shall not exceed

those currently prevailing for the supply

of like equipment, facilities and property

on comparable terms in the area where the

Petroleum Operations are being conducted.

The equipment and facilities referred to

herein shall exclude major investment items

such as (but not limited to) drilling rigs,



producing platforms, oil treating

facilities, oil and gas loading and

transportation systems, storage and

terminal facilities and other major

facilities, rates for which shall be

subject to separate agreement with the

Government.

3.1.5



Communications

Cost of acquiring, leasing, installing, operating,

repairing and maintaining communication systems

including satellite, radio and microwave

facilities between the Contract Area and the

Contractor's base facility, offices, helicopter

bases, port and railway yards.



3.1.6



Office, Shore Bases and Miscellaneous Facilities

Net cost to Contractor of establishing,

maintaining and operating any office, sub-office,

shore base facility, warehouse, housing or other

facility directly serving the Petroleum

Operations. If any such facility services contract

114

areas other than the Contract Area, or any

business other than Petroleum Operations, the net

costs thereof shall be allocated on an equitable

and consistent basis.



3.1.7



Environmental Studies and Protection

Costs incurred in conducting the environmental

impact studies for the Contract Area, and in

taking environmental protection measures pursuant

to the terms of the Contract.



3.1.8



Materials and Equipment

(a)



General

So far as is practicable and consistent

with efficient and economical operation,

only such material shall be purchased or

furnished by the Contractor for use in the

Petroleum Operations as may be required for

use in the reasonably foreseeable future

and the accumulation of surplus stocks

shall be avoided to the extent possible.

Material and equipment held in inventory

shall only be charged to the accounts when

such material is removed from inventory and

used in Petroleum Operations. Contractor

shall be allowed to recover interest at the

LIBOR rate plus one percent (1%) for

reasonable inventories it carries. Costs

shall be charged to the accounting records

and books based on the average cost method.



(b)



Warranty

In the case of defective material or

equipment, any adjustment received by the

Contractor from the suppliers or

manufacturers or their agents in respect of

any warranty on material or equipment shall

be credited to the accounts under the

Contract.



(c)

Value of Materials Charged to the Accounts

Under the Contract.

(i)



Except as otherwise provided in



115



subparagraph (b), materials

purchased by the Contractor and

used in the Petroleum Operations

shall be valued to include

invoice price less trade and

cash discounts, if any, purchase

and procurement fees plus

freight and forwarding charges

between point of

supply and point of shipment,

freight to port of destination,

insurance, taxes, customs

duties, consular fees, other

items chargeable against

imported material and, where

applicable , handling and

transportation costs from point

of importation to or from

warehouse or operating site, and

these costs shall not exceed

those currently prevailing in

normal arms length transactions

on the open market.



(ii)



Material purchased from or sold to

Affiliates or transferred to or

from activities of the Contractor

other than Petroleum Operations

under the Contract:



(aa)



new material (hereinafter

referred to as condition A)

shall be valued at the current

international price which shall

not exceed the price prevailing

in normal arms length transactions on the open market;



(bb)



used material which is in sound

and serviceable condition and is

suitable for reuse without

reconditioning (hereinafter

referred to as condition B)

shall be priced at not more than

seventy-five percent (75%) of

the current price of the above

mentioned new materials;



(cc)



used material which cannot be

classified as condition B, but

which, after reconditioning,

will be further serviceable for

original function as good

second-hand condition B material

or is serviceable for original

function, but substantially not

suitable for reconditioning

(hereinafter referred to as

condition C) shall be priced at

not more than fifty per cent

(50%) of the current price of

the new material referred to

above as condition A.



The cost of reconditioning shall be charged to the

reconditioned material, provided that the

condition C material value plus the cost of

116

reconditioning does not exceed the value of

condition B material.



Material which cannot be classified as condition B

or condition C shall be priced at a value

commensurate with its use.

Material involving erection expenditure shall be

charged at the applicable condition percentage

(referred to above) of the current knocked-down

price of new material referred to above as

condition A.

When the use of material is temporary and its

service to the Petroleum Operations does not

justify the reduction in price in relation to

materials referred to above as conditions B and C,

such material shall be priced on a basis that will

result in a net charge to the accounts under the

Contract consistent with the value of the service

rendered.

3.1.9



Duties, Fees and Other Charges

Any duties, levies, fees, charges and any other

assessments levied by any governmental or taxing

authority in connection with the Contractor's

activities under the Contract and paid directly by

the Contractor except corporate income tax payable

by the constituents of the Contractor. If Operator

or its Affiliate is subject to income or

withholding tax as a result of service performed

at cost for Petroleum Operations under the

Agreement, its charges for such services may be

increased by the amount of such taxes incurred

("grossed up"), provided such charges have not

been otherwise recovered or a tax credit received.



3.1.10



Insurance and Losses

Insurance premia and costs incurred for insurance

required by law or pursuant to Article 24 of the

Contract, provided that such insurance is

customary, affords prudent protection against risk

and is at a premium no higher than that charged on

a competitive basis by insurance companies which

are not Affiliates. Actual costs and losses

incurred shall be allowable to the extent not made

good by insurance. Such costs may include, but are

not limited to, repair and replacement of property

resulting from damages or losses incurred by fire,

flood, storm, theft, accident or such other cause.

117



3.1.11



Legal Expenses

All reasonable costs and expenses resulting from

the handling, investigating, asserting, defending,

or settling of any claim or legal action necessary

or expedient for the procuring, perfecting,

retention and protection of the Contract Area and

in defending or prosecuting lawsuits involving the

Contract Area or any third party claim arising out

of Petroleum Operations under the Contract, or

sums paid in respect of legal services necessary

for the protection of the joint interest of

Government and the Contractor, shall be allowable.

Such expenditures shall include attorney's fees,

court costs, costs of investigation and

procurement of evidence and amounts paid in

settlement or satisfaction of any such litigation

and claims provided such costs are not covered

elsewhere in the Accounting Procedure. Where legal

services are rendered in such matters by salaried

or regularly retained lawyers of the Contractor or

an Affiliate, such compensation shall be included



instead under Sections 3.1.2 or 3.1.4(b)(i) above

as applicable.

3.1.12



Training Costs

All costs and expenses incurred by the Contractor

in training as is required under Article 22 of the

Contract.



3.1.13



General and Administrative Costs



The costs described in Section 2.6.1 and the

charge described in Section 2.6.2 of this

Accounting Procedure.

3.2



COSTS NOT RECOVERABLE AND NOT ALLOWABLE UNDER THE CONTRACT

The following costs and expenses shall not be recoverable or

allowable (whether directly as such or indirectly as part of any

other charges or expenses) for cost recovery and production sharing

purposes under the Contract:

(i)



(ii)



costs and charges incurred before the Effective

Date including costs in respect of preparation,

signature or ratification of this Contract except

as otherwise provided in Article 13.1;

expenditures in respect of any financial

transaction to negotiate, float or otherwise

obtain or secure funds for Petroleum Operations

including, but not limited to, interest,

commission, brokerage and fees related to such

118

transactions, and exchange losses on loans or

other financing;



(iii)

(iv)



(v)



(vi)

(vii)

(viii)



expenditures incurred in obtaining, furnishing and

maintaining the guarantees required under the

Contract and any other amounts spent on

indemnities with regard to non-fulfillment of

contractual obligations;

attorney's fees and other costs and charges in

connection with arbitration proceedings and sole

expert determination pursuant to the Contract;

fines and penalties imposed by courts of law of

the Republic of India;

donations and contributions;

expenditures for the creation of any partnership

or joint venture arrangement;



(ix)



amounts paid with respect to non-fulfillment of

contractual obligations;



(x)



costs incurred as a result of failure to insure

where insurance is required pursuant to the

Contract;



(xi)



(xii)

3.3



costs of marketing or transportation of Petroleum

beyond the Delivery Point;



costs and expenditures incurred as a result of

wilful misconduct or gross negligence of the

Contractor's supervisory personnel;

payments pursuant to Article 16 of the Contract.



OTHER COSTS RECOVERABLE AND ALLOWABLE.

Any other costs and expenditures not included in Section 3.1 or 3.2



of this Accounting Procedure but which have been incurred by the

Contractor for the necessary and proper conduct of Petroleum

Operations pursuant to an approved Work Programme and Budget.

3.4



INCIDENTAL INCOME AND CREDITS

All incidental income and proceeds received from Petroleum

Operations under the Contract, including but not limited to the

items listed below, shall be credited to the accounts under the

Contract and shall be taken into account for cost recovery,

production sharing and participation purposes in the manner

described in Articles 13 and 14 of the Contract:

(i)



The proceeds of any insurance or claim or

119

judicial awards in connection with Petroleum

Operations under the Contract or any assets

charged to the accounts under the Contract where

such operations or assets have been insured and

the premia charged to the accounts under the

Contract;



(ii)



(iii)



(iv)



Any adjustment received by the Contractor from the

suppliers/manufacturers or their agents in

connection with defective material, the cost of

which was previously charged by the Contractor to

the accounts under the Contract;

Rentals, refunds or other credits received by the

Contractor which apply to any charge which has

been made to the accounts under the Contract;



(v)



Prices originally charged to the accounts under

the Contract for materials subsequently exported

from the Republic of India without being used in

Petroleum Operations under the Contract;



(vi)



Proceeds from the sale or exchange by the

Contractor of plant or facilities from a Field,

the acquisition costs of which have been charged

to the accounts under the Contract for the

relevant Field;



(vii)



3.5



Revenue received from third parties for the use

of property or assets, the cost of which has been

charged to the accounts under the Contract;



Legal costs charged to the accounts under Section

3.1.11 of this Accounting Procedure and

subsequently recovered by the Contractor.



NON-DUPLICATION OF CHARGES AND CREDITS

Notwithstanding any provision to the contrary in this Accounting

Procedure, it is the intention that there shall be no duplication

of charges or credits to the accounts under the Contract.

120

SECTION 4

RECORDS AND INVENTORIES OF ASSETS



4.1



RECORDS

4.1.1



The Contractor shall keep and maintain detailed

records of property and assets in use for or in

connection with Petroleum Operations under the

Contract in accordance with normal practices in

exploration and production activities of the

international petroleum industry. Such records

shall include information on quantities, location

and condition of such property and assets, and

whether such property or assets are leased or



owned.

4.1.2



4.2



INVENTORIES

4.2.1



4.2.2



The Contractor shall furnish annually particulars

to the Government, by notice in writing as

provided in the Contract, of all major assets

acquired by the Contractor to be used for or in

connection with Petroleum Operations.

The Contractor shall:

(a)



not less than once every twelve (12)

Calendar Months with respect to movable

assets take an inventory of the

controllable assets used for or in

connection with Petroleum Operations in

terms of the Contract and address and

deliver such inventory to the Government

with a statement of the principles upon

which valuation of the assets mentioned in

such inventory has been based. Controllable

assets means those assets the Operator

shall submit to detailed record keeping.



(b)



not less than once every three (3) years

with respect to immovable assets, take an

inventory of the assets used for or in

connection with Petroleum Operations in

terms of the Contract and address and

deliver such inventory to the Government

together with a written statement of the

principles upon which valuation of the

assets mentioned in such inventory has been

based. Immovable assets means those assets

which are placed in service and have an

original cost in excess of Fifty Thousand

United States Dollars (US$50,000).



The Contractor shall give the Government at least

thirty (30) days notice in writing in the manner

provided for in the Contract of its intention to

take the inventory referred to in Section 4.2.1

121

and the Government shall have the right to be

represented when such inventory is taken.



4.2.3



When an assignment of rights under the Contract

takes place, a special inventory shall be taken by

the Contractor at the request of the assignee

provided that the cost of such inventory is borne

by the assignee and paid to the Contractor.



4.2.4



In order to give effect to Article 27 of the

Contract, the Contractor shall provide the

Government with a comprehensive list of all

relevant assets when requested by the Government

to do so.

122



SECTION 5

PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT

5.1



From the date of first production, after the Effective Date, of

Petroleum from the Contract Area, the Contractor shall submit a

Production Statement for each Calendar Month to Government showing

the following information separately for each producing field and

in aggregate for the Contract Area:

5.1.1



The quantity of Crude Oil produced and saved.



5.1.2



The quality and characteristics of such Crude Oil

produced and saved.



5.1.3



The quantity of Associated Natural Gas and Non

Associated Natural Gas produced and saved.



5.1.4



The quality, characteristics and composition of

such Natural Gas produced and saved.



5.1.5



The quantities of Crude Oil and Natural Gas used

for the purposes of carrying on drilling and

Production Operations and pumping to field

storage, as well as quantities reinjected.



5.1.6



The quantities of Crude Oil and Natural Gas

unavoidably lost.



5.1.7



The quantities of Natural Gas flared and vented.



5.1.8



The size of Petroleum stocks held on the first

day of the Calendar Month in question.



5.1.9



The size of Petroleum stocks held on the last day

of the Calendar Month in question.



5.1.10



The quantities of Natural Gas reinjected into the

Petroleum Reservoir.



5.1.11



The number of days in the Calendar Month during

which Petroleum was produced from each Field.



5.1.12



The Gas/Oil ratio for each Field for the relevant

Calendar Month.



5.1.13



The water/Oil ratio for each Field for the

relevant Calendar Month, if available.



5.2



All quantities shown in this Statement shall be expressed in

both volumetric terms (barrels of oil and cubic metres of

gas) and in weight (metric tonnes).



5.3



The Government may direct in writing that the Contractor

include other particulars relating to the production of

Petroleum in its Production Statement, and the Contractor

123

shall to the extent possible comply with such direction.



5.4



The Production Statement for each Calendar Month shall be submitted

to Government no later than ten (10) days after the end of such

Calendar Month for Oil and the immediately succeeding Calendar

Month for Gas.



5.5



The Contractor shall, for the purposes of Article 15, submit a

statement to Government providing the calculation of the amount of

royalty and cess, separately, paid with respect to each Calendar

Month for each producing Field and in aggregate for the Contract

Area. The statement shall show the following information:



5.6



5.5.1



The quantity of Crude Oil and Condensate produced

and saved.



5.5.2



The quantity of ANG and NANG produced and saved.



5.5.3



The amount of royalty and cess, separately, paid

on Crude Oil and Condensate produced, saved and

sold and the particulars of the calculation

thereof.



5.5.4



The amount of royalty paid on ANG and NANG and

the particulars of the calculation thereof.



The Royalty and Cess Statement for each Calendar Month shall be

submitted to Government no later than twenty-one (21) days after

the end of such Calendar Month for Oil and the most recently



available Calendar Month for Gas.

124

SECTION 6

VALUE OF PRODUCTION AND PRICING STATEMENT

6.1



The Contractor shall prepare a Statement providing

calculations of the value of Crude Oil produced and saved

during each Calendar Month. This Statement shall contain

the following information:

6.1.1



The quantities, prices and receipts realized by

the Contractor as a result of sales of Crude Oil

to third parties (with any sales to Government

being separately identified) made during the

Calendar Month in question.



6.1.2



The quantities, prices and receipts realized

therefor by the Contractor as a result of sales of

Crude Oil made during the Calendar Month in

question, other than to third parties.



6.1.3



The quantities of Crude Oil appropriated by the

Contractor to refining or other processing without

otherwise being disposed of in the form of Crude

Oil.



6.1.4



The value of stocks of Crude Oil on the first day

of the Calendar Month in question.



6.1.5



The value of stocks of Crude Oil on the last day

of the Calendar Month in question.



6.1.6



The percentage volume of total sales of Crude Oil

made by the Contractor during the Calendar Month

that are Arms Length Sales to third parties.



6.1.7



Information available to the Contractor, in so

far as required for the purposes of Article 19 of

the Contract, concerning the prices of

competitive crude oils produced by the main

petroleum producing and exporting countries

including contract prices, discounts and premia,

and prices obtained on the spot markets.



6.2



The Contractor shall prepare a statement providing calculations of

the value of ANG and NANG produced and sold during each Calendar

Month for the most recently available Calendar Month. This

Statement shall contain all information of the type specified in

Section 6.1 for Crude Oil as is applicable to Gas and such other

relevant information as may be required by the Government.



6.3



The Statements required pursuant to Sections 6.1 and 6.2

shall include a detailed breakdown of the calculation of the

prices of Crude Oil, Associated Natural Gas and Non

Associated Natural Gas.

125



6.4



The Value of Production and Pricing Statement for each Calendar

Month shall be submitted to Government not later than twenty-one

(21) days after the end of such Calendar Month for Oil and the most

recently available Calendar Month for Gas.

126

SECTION 7

STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS



7.1



The Contractor shall prepare with respect to each Calendar Quarter

a Statement of Costs, Expenditures and Receipts under the Contract.

The statement shall distinguish between Exploration costs,

Development Costs and Production Costs and shall separately

identify all significant items of costs and expenditure as itemized

in Section 3 of this Accounting Procedure within these categories.



The statement of receipts shall distinguish between income from the

sale of Petroleum and incidental income of the sort itemized in

Section 3.4 of this Accounting Procedure. If the Government is not

satisfied with the categories, it shall be entitled to request a

more detailed breakdown. The Statement shall show the following:



7.2



7.1.1



Actual costs, expenditures and receipts for the

Calendar Quarter in question.



7.1.2



Cumulative costs, expenditures and receipts for

the Year in question.



7.1.3



Latest forecast of cumulative costs, expenditures

and receipts at the Year end.



7.1.4



Variations between budget forecast and latest

forecast and explanations thereof.



The Statement of Costs, Expenditure and Receipts of each Calendar

Quarter shall be submitted to Government not later than sixty (60)

days after the end of such Calendar Quarter.

127

SECTION 8

COST RECOVERY STATEMENT



8.1



The Contractor shall prepare with respect to each Calendar

Quarter a Cost Recovery Statement containing the following

information:

8.1.1



Unrecovered Contract Costs carried forward from

the previous Calendar Quarter, if any.



8.1.2



Contract costs for the Calendar Quarter in

question.



8.1.3



Total Contract Costs for the Calendar Quarter in

question (Section 8.1.1 plus Section 8.1.2).



8.1.4



Quantity and value of Cost Petroleum taken and

disposed of by the Contractor for the Calendar

Quarter in question.



8.1.5



Contract Costs recovered during the Calendar

Quarter in question.



8.1.6



Total cumulative amount of Contract Costs

recovered up to the end of the Calendar Quarter

in question.



8.1.7



Amount of Contract Costs to be carried forward

into the next Calendar Quarter.



8.2



Where necessary and possible, the information to be provided under

Section 8.1 shall be identified separately Field by Field and also

separately for Crude Oil, Associated Natural Gas and Non Associated

Natural Gas.



8.3



The cost recovery information required pursuant to

Subsection 8.1 above shall be presented in sufficient detail

so as to enable Government to identify how the cost of

assets are being recovered.



8.4



The Cost Recovery Statement for each Calendar Quarter shall be

submitted to Government not later than sixty (60) days after the

end of such Calendar Quarter.

128

SECTION 9

PRODUCTION SHARING STATEMENT



9.1



The Contractor shall prepare with respect to each Calendar

Quarter a Production Sharing Statement containing the following



information:

9.1.1



The calculation of the applicable net cash flows

as defined in Appendix D for the Calendar Quarter

in question.



9.1.2



The Investment Multiple applicable in the

Calendar Quarter in question.



9.1.3



Based on Section 9.1.2 and Article 14, the

appropriate percentages of Profit Petroleum, if

any, for the Government and Contractor in the

Calendar Quarter in question.



9.1.4



The total amount of Profit Petroleum, if any, to

be shared between the Government and Contractor in

the Calendar Quarter in question.



9.1.5



Based on Sections 9.1.3 and 9.1.4, the amount of

Profit Petroleum due to the Government and

Contractor as well as to each constituent of the

Contractor in the Calendar Quarter in question.



9.1.6



The actual amounts of Petroleum taken by the

Government and Contractor as well as by each

constituent of the Contractor during the Calendar

Quarter in question to satisfy their entitlement

pursuant to Section 9.1.5.



9.1.7



Adjustments to be made, if any, in future

Calendar Quarters in the respective amounts of

Profit Petroleum due to the Government and

Contractor as well as to each constituent of the

Contractor on account of any differences between

the amounts specified in Sections 9.1.5 and

9.1.6, as well as any cumulative adjustments

outstanding from previous Calendar Quarters.



9.2



Where necessary and if possible, the information to be provided

under Section 9.1 shall be identified separately for each Field and

also separately for Crude Oil as distinct from Natural Gas.



9.3



The Production Sharing Statement shall be submitted to

Government not later than sixty (60) days after the end of

such Calendar Quarter.

129

SECTION 10

END OF FINANCIAL YEAR STATEMENT



10.1



The Contractor shall prepare a definitive End of Year Statement.

The statement shall contain aggregated information in the same

format as required in the Production Statement and Royalty and Cess

Statement, Value of Production and Pricing Statement, Statement of

Costs, Expenditure & Receipts, Cost Recovery Statement and

Production Sharing Statement, but shall be based on actual

quantities of Petroleum produced, income received and costs and

expenditures incurred. Based upon this Statement, any adjustments

that are necessary shall be made to the transactions concerned

under the Contract.



10.2



The End of Year Statement for each year shall be submitted to

Government within ninety (90) days of the end of such Year.

130

SECTION 11

BUDGET STATEMENT



11.1



The Contractor shall prepare a Budget Statement for each

Year. This statement shall distinguish between budgeted

Exploration Costs, Development Costs and Production Costs

and shall show the following:

11.1.1



Forecast costs, expenditures and receipts for the



Year in question.

11.1.2



11.2







1.



A schedule showing the most important individual

items of total costs, expenditures and receipts

for the Year.



The Budget Statement shall be submitted to Government with respect

to each Year not less than ninety (90) days before the start of the

Year provided that in the case of the Year in which the Effective

Date falls, the Budget Statement shall be submitted within ninety

(90) days of the Effective Date.

131

APPENDIX D

CALCULATION OF THE

INVESTMENT MULTIPLE FOR PRODUCTION SHARING PURPOSES

In accordance with the provisions of Article 14, the share

of the Government and the Contractor respectively of Profit

Petroleum from the Contract Area in any Financial Year shall

be determined by the Investment Multiple earned by the

Companies from the Contract Area at the end of the preceding

Financial Year. These measures of profitability shall be

calculated on the basis of the appropriate net cash flows as

specified in this Appendix D.



INVESTMENT MULTIPLE

2.



The "Net Cash Income" of the Companies from the Contract

Area in any particular Financial Year is the aggregate value

for the year of the following:

(i)



Cost Petroleum entitlement of the Companies as

provided in Article 13;

PLUS



(ii)



Profit Petroleum entitlement of the Companies as

provided in Article 14;

PLUS



(iii)



incidental income of the Companies of the type

specified in Section 3.4 of the Accounting

Procedure arising from Petroleum Operations and

apportioned to the Contract Area;

LESS



(iv)



the Companies' share of all Production Costs and

royalty/cess payments incurred on or in the

Contract Area;

LESS



(v)



3.



the notional income tax, determined in accordance

with paragraph 7 of this Appendix, payable by the

Companies on profits and gains from the Contract

Area.



The "Investment" made by the Companies in the Contract Area

in any particular Financial Year is the aggregate value for

the year of:

(i)



Exploration Costs incurred by the Companies in the

Contract Area and apportioned to the Contract Area

in the same proportion that said Costs were

recovered pursuant to Articles 13.2 and 13.3.

132

PLUS



(ii)



Development Costs incurred by the Companies in



the Contract Area.

4.



For the purposes of the calculation of the Investment Multiple,

Costs or expenditures which are not allowable as provided in the

Accounting Procedure shall be excluded from Contract Costs and be

disregarded.



5.



The Investment Multiple ratio earned by the Companies as at

the end of any Financial Year from the Contract Area shall

be calculated by dividing the aggregate value of the

addition of each of the annual Net Cash Incomes

(accumulated, without interest, up to and including that

Financial Year starting from the Financial Year in which

Production Costs were first incurred or production first

arose after the Effective Date on or in the Contract Area)

by the aggregate value of the addition of each of the annual

Investments (accumulated, without interest, up to and

including that Financial Year starting from the Financial

Year in which Exploration and Developments Costs were first

incurred).



6.



Profit Petroleum from the Contract Area in any Financial Year shall

be shared between the Government and the Contractor in accordance

with the value of the Investment Multiple earned by the Companies

as at the end of the previous Financial Year pursuant to Articles

14.2, 14.3 and 14.4.



GENERAL

7.



In determining the amount of notional income tax to be

deducted in the applicable cash flows specified in paragraph

2 of this Appendix, a notional income tax liability in

respect of the Contract Area shall be determined for each

Company, as if the conduct of Petroleum Operations by the

Company in the Contract Area constituted the sole business

of the Company and as if the provisions of the Income Tax

Act, 1961, with respect to the computation of income tax at

a fifty percent (50%) rate applicable to Petroleum

Operations on the basis of the income and deductions

provided for in Article 15 of this Contract were accordingly

applicable separately to the Contract Area, disregarding any

income, allowances, deductions, losses or set-off of losses

from any other Contract Area or business of the Company.



8.



Sample Calculation is attached in Appendix "D-1".

133







APPENDIX "D-1"

INVESTMENT MULTIPLE CALCULATION - EXAMPLE PROBLEM



The following example is intended to demonstrate the calculation and impact of

the Investment Multiple. The figures shown would be for the Companies and are

fictitious in this example for demonstration purposes. The investment multiple

is calculated individually for the Companies.

RIL OR EOGIL

Investment Multiple at beginning of

Financial Year 11

Profit Oil Shares at beginning of

Financial Year 11

US$ MILLIONS

A Cumulative Net Cash Income at

beginning of Financial Year 11

+ Cost Petroleum in Financial Year 11

+ Profit Petroleum in Financial Year 11

+ Incidental Income in Financial Year 11

- Production Costs in Financial Year 11

- Oil Royalty and Cess in Financial Year 11

- Gas Royalty in Financial Year 11

- Notional Income Tax in Financial Year 11

B = Cumulative Net Cash Income at end of

Financial Year 11



1.96

24.00%

100.00

10.00

1.00

.00

.60

1.57

0.41

2.00

106.42



C



D



Cumulative Investment at beginning of

Financial Year 11

+ Exploration Costs in Financial Year 11

+ Development Costs in Financial Year 11

+ Service Costs in Financial Year 11

= Cumulative Investment at end of

Financial Year 11



51.00

0.30

1.50

0.00

52.80



Investment Multiple at beginning of

Financial Year 12 = (B / D)

Profit Oil Shares at beginning of

Financial Year 12



2.02

18.00%



Since the Investment Multiple is calculated to be greater than 2.0 at the

beginning of Financial Year 12, the Profit Petroleum share to be received by RIL

or EOGIL falls from 24% to 18% at the inception of Financial Year 12.

In the event that the Investment Multiple were found to exceed 2.0

during the financial close of Financial Year 11, the Contractor may

have received excess Profit Petroleum during the first sixty (60)

days of Financial Year 12. In this case, the quantity of excess

Profit Petroleum will be calculated and the accounts will be

settled by adjustment to entitlements within sixty (60) days of the following

year (year twelve).

134



APPENDIX E

FORM OF FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 29 of the Contract)

WHEREAS ENRON EXPLORATION COMPANY, a Company duly organized and existing under

the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street,

Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which

expression shall include its successors and assigns) is the indirect owner of

100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and

direct owner of its parent company; and

WHEREAS Company is signatory to a Production Sharing Contract of even date of

this guarantee in respect of an Offshore area identified as Panna and Mukta

Blocks (hereinafter referred to as "the Contract") made between the Government

of India (hereinafter referred to as "the Government"), Company, RELIANCE

INDUSTRIES LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter

referred to as "Contractor" which expression shall include its successors and

permitted assigns); and

WHEREAS the Guarantor wishes to guarantee the performance of Company or its

Affiliate Assignee under the Contract as required by the terms of the Contract;

NOW, THEREFORE, this Deed hereby provides as follows:

1.



The Guarantor hereby unconditionally and irrevocably guarantees to the

Government that it will make available, or cause to be made available,

to Company or any other directly or indirectly owned Affiliate of

Company to which any part or all of Company's rights or interest under

the Contract may subsequently be assigned ('Affiliate Assignee'), to

ensure that Company or any Affiliate Assignee can carry out its work

commitment as set forth in the Contract.



2.



The Guarantor further unconditionally and irrevocably guarantees to the

Government reasonable compliance by Company or any Affiliate Assignee,

of any obligations of Company or any Affiliate Assignee under the

Contract.



3.



The Guarantor hereby undertakes to the Government that if Company, or

any Affiliate Assignee, shall, in any respect, fail to perform its work

commitments under the Contract or commit any material breach of such

obligations, then the Guarantor shall fulfill or cause to be fulfilled

the obligations in place of Company or any Affiliate Assignee, and will

indemnify the Government against all actual losses, damages, costs,

expenses, or otherwise which may result directly from such failure to

perform or breach on the part of Company. In no event shall Guarantor be

liable for any special consequential, indirect, incidental or punitive



damages of any kind or character, including, but not limited to, loss of

profits or revenues, loss of product or loss of use arising out of or

related to a material breach by Company of its obligations under the

Contract.

4.



This guarantee shall take effect from the Effective Date and shall

remain in full force and effect for the duration of the Contract and

thereafter until no sum remains payable by Company, or its Affiliate

Assignee, under the Contract or as a result of any decision or award

made by any expert or arbitration tribunal thereunder.



5.



This guarantee shall not be affected by any change in the Articles of

Association and by-laws of Company or the Guarantor or in any instrument

135

establishing the Licensee.



6.



The liabilities of the Guarantor shall not be discharged or affected by

(a) any time indulgence, waiver or consent given to Company; (b) any

amendment to the Contract or to any security or other guarantee or

indemnity to which Company has agreed; (c) the enforcement or waiver of

any terms of the Contract or of any security, other guarantee or

indemnity; or (d) the dissolution, amalgamation, reconstruction or

reorganization of Company.



7.



This guarantee shall be governed by and construed in accordance with the

laws of India.

IN WITNESS WHEREOF the Guarantor, through its duly authorized

representatives, has caused its seal to be duly affixed hereto and this

guarantee to be duly executed the _____________ day of _________ 1994.



The seal of ___________ was hereto duly affixed by ___________this_____ day of

________ 1994 in accordance with its by-laws and this guarantee was duly signed

by ________________ and ______________________

as required by the said by-laws.



- -----------------------Secretary



-------------------Vice President



Witness:

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



136

APPENDIX F

EQUIPMENT



The development plan, illustrated in Figure G-1 is based on the assumption that

ONGC has provided at the Effective Date, as represented in data and information

heretofore provided by ONGC, certain structures and facilities. All Equipment

specified below, including that not yet installed, shall be provided at ONGC's

cost and risk.

The following facilities have been installed and placed into service by ONGC as

of 1st August, 1993:

-



1 well platform PA

8 wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8)

Early Production System ("EPS") jack-up rig SAGAR LAXMI,

including production systems and all fixtures and

appurtenances

Tanker loading system, loading buoy and appurtenances

PB, PD, PE (jackets only) installed; well fluid line

connecting each to EPS

- 23 development wells drilled in PB, PD, PE

- MA well platform

- 8 development wells drilled in MA

- 14" well fluid pipeline connects MA to Panna EPS

- Interconnecting Flowlines and Pipelines



The following facilities were assumed by the Companies to be installed and

commissioned by ONGC prior to the Effective Date and Companies' estimate of

project cost does not include the following (ONGC's schedule for installation as

represented to Companies is also shown):

PB Deck and Facilities - Fourth Quarter 1993

PD Deck and Facilities - First Quarter 1994

PE Deck and Facilities - Second Quarter 1994

MA Deck and Facilities - First Quarter 1994

137







APPENDIX G

DEVELOPMENT COMMITMENT SPECIFIED BY THE COMPANIES



The development plan, illustrated in Figure G-1 is based on the assumption that

ONGC has provided at the Effective Date, as represented in data and information

heretofore provided by ONGC, certain structures and facilities. The development

of the Fields is proposed to be completed by Contractor through its activities

under this Contract. The following describes what facilities, platforms and

wells are provided by ONGC prior to the Effective Date.

The following facilities have been installed and placed into service by ONGC:

1 well platform PA

- 8 wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8)

- Early Production System, "EPS" (jack-up)

- Tanker loading system (via SBM)

- PB, PD, PE (jackets only) installed; well fluid line connecting each

to EPS

- 23 development wells drilled in PB, PD, PE

- MA well platform

- 8 development wells drilled in MA - 14" well fluid pipeline connects

MA to Panna EPS

The following facilities were assumed by the Companies to be installed and

commissioned by ONGC prior to the Effective Date and Companies' estimate of

project cost does not include the following (ONGC's schedule for installation as

represented to Companies is also shown):

PB Deck and Facilities - Fourth Quarter 1993

PD Deck and Facilities - First Quarter 1994

PE Deck and Facilities - Second Quarter 1994

MA Deck and Facilities - First Quarter 1994

Drill two horizontal wells from PD - Second half 1993

Drill two horizontal wells from PE - Second half 1993

Complete two horizontal wells from PE - Second half 1993

The following work, intended to complete the development plan contemplated, is

included in Companies plan and only these facilities and wells are subject to

the Cost Recovery Limit as defined in Article 13:

Panna

-



Drill two horizontal wells from PD

Drill two horizontal sections in two suspended wells on

PE and complete same

Fabricate and install PC and PF jackets

Fabricate (or refurbish) and install PC and PF deck

packages

Drill nine horizontal wells from PC

Drill nine horizontal wells from PF

Fabricate and install PPA and PQ

138



-



Lay necessary well fluid, gaslift and free gas lines

Lay sour gas export line from PPA to proposed ONGC 42"

pipeline

Acquire 850 km of 2-D seismic data

Drill two exploratory wells

Geophysical, geological and engineering studies



Mukta

-



Fabricate and install MB jacket



-



Fabricate (or refurbish) and install MB deck package

Drill six directional wells from MB

Lay MB-MA well fluid line

Lay PPA-MA-MB gaslift line

Drill two exploratory wells

Geophysical, geological and engineering studies

Reprocess and interpret the 1988-89 3-D survey and usable

data from the 1991 SBS 2- D survey



Annex G-1 shows Companies' development concept based on an assumed project start

date of 1st July, 1993.

139



APPENDIX G

TECHNICAL INFORMATION



ANNEXURE G-1



The following analysis is based on information presented by GOI which has

not been independently verified. Hence, the information given here is

without warranty, although we believe it to be accurate. We have accounted

for relevant technical details provided in the Docket and Data Package.

These technical data are subject to different interpretations and may not

necessarily lead to unique results.

VIIA TECHNICAL INFORMATION FOR PANNA FIELD

(a,b,c)

1.



LOCATION



The 430 square kilometers Panna block is located in the Offshore Bombay

basin of India about 50 km east of the giant Bombay High field. Panna

field is a large culmination that occurs where the west-plunging axis of

the Heera-Bassein structural block intersects the western flank of the

fault-bound north-south trending Central Graben (FIGURE VIIA-1).

2.



STRATIGRAPHY



Commercial hydrocarbons are trapped in porous and permeable shoal

carbonate reservoirs of the Bassein B zone (Middle Eocene) and A zone

(Early Oligocene). The B zone consists of over 300 meters of porous algal

and fusillinid packstones and grainstones. It is the primary oil reservoir

in Panna with up to 27 meters of oil column and 25 meters of gas. The B

zone overlies shales and thin sandstones of the Early Eocene-Paleocene

Basal Clastics formation which have yielded some interesting but

apparently subcommercial tests of oil and gas.

The top of the B-zone is an unconformable surface overlain by 10 to 15

meters of thin shales and argillaceous limestones called the Tight zone.

The Tight zone grades upward into the A zone. It consists of 50 to 60

meters of interbedded tight and porous wackestones and packstones which

are in turn overlain by alternating shales and tight limestones of the

upper Bassein formation. The A zone is primarily a gas reservoir with

upwards of 75 meters of gas column. Mappable seismic reflectors occur at

the top A zone (H3A) and top B zone (H3B) (FIGURE VIIA-2).

3.



STRUCTURE



ONGC structure maps on the B and A zones are shown in FIGURES VIIA-3 and

4. A EEC/RIL seismic time map on the H3B reflector is exhibited in FIGURE

VIIA-5. Comparison of the time map with the cited B zone structure map

reveals similarities in the general structural aspects of Panna field

including a large broad low-relief SE structure which was tested by the

BS-1,3,6 and 8 exploration wells; a high-relief WNW structure penetrated

in a flank position by the BN-1 development well; and another high-relief

NW structure that was also penetrated in a flank position by the BS-5

exploration well. Both the BN-1 and BS-5 wells have indicated log pay but

neither was production tested.

The time map exhibits numerous NW-SE oriented faults with upwards of 100

meters of throw on the eastern margin of the field and lesser amounts of

the 5 to 20 meters range in the field proper where they appear to control

the cited high-relief "pop-up" structures. The seismic section, BS-425A,

located on FIGURE VIIA-6 reveals the nature of the faults along a WNW-ESE

transect (FIGURE VIIA-7). Although all appear to have normal throw, their



similar orientation and cross sectional geometry suggest a possible

transtensional wrench component. This is supported by the smaller

conjugate ENE-WSW faults that lie en-echelon along the larger fault

trends.

The large SE structure currently under development by ONGC is considered

as the Base-Case reserve target in this proposal. It will be referred to

by platform designation as the "PA-PF" structure. The two smaller

high-relief structures are considered as upside Success Case targets whose

development would be contingent on the successful outcome of a work

program detailed later in this document. They are referred to as the "PG"

and "PH" structures as shown in FIGURE VIIA-3 which exhibits a conceptual

development scheme overlay to the B zone structure.

4.



RESERVOIR CHARACTERIZATION



Core studies indicate that both the A and B zones have been subjected to

sea-level lowering and emergence which brought about diagenetic

dissolution and general enhancement of porosity and permeability (FIGURES

VIIA-8,9). Hydrocarbon fluid contacts appear to be extremely consistent

throughout the greater field area. The W-E diagrammatic cross section of

FIGURE VIIA-10 demonstrates the cross cutting nature of the fluid levels

through formational boundaries.

Well performance data suggest strong pressure support from an active water

drive mechanism associated with the massive B zone aquifer.

Dissolution-enhanced vertical permeability and the cited small-scale

faults are interpreted to have locally breached the sealing capacity of

the Tight zone between the A and B zones. Therefore, concurrent production

of B zone oil and A zone gas is not advised, especially in the early life

of the field.

Detailed petrophysical analysis was done on straight-hole exploration

wells with complete modern log suites including BS-5, BS-6 and BS-8. TABLE

VIIA-1 lists the petrophysical input parameters utilized for the density

porosity and Archie water saturation calculations. The oil/free-water

contact was observed at 1760 meters subsea in analysed wells. Similarly,

the gas/oil contact consistently occurred at 1733 meters subsea as defined

by RFT and log analysis data. In the B zone, up to 50 meters of the upper

hydrocarbon-bearing interval has average density porosity of 29% while the

middle and lower water-wet portions exhibit an average density porosity of

20%. For the A zone, only higher porosity beds were counted as pay with an

average of 13 meters net out of 55 gross and 23% density porosity.

Petrophysical analysis of the B Zone indicates that there is a distinct

zonation of the hydrocarbon interval as depicted on the type log in FIGURE

VIIA-11. These zones include the following:

ZONE BASE

--------Free Gas

Free Oil

Moveable Oil

Residual Oil



SUBSEA ELEVATION(m)

------------------1733

1746*

1751*

1760



* Surfaces vary 1-2 meters as a function of reservoir quality

5.



VOLUMETRIC RESERVE CALCULATIONS



Volumetric input parameters, depict the maximum, minimum and most likely

values of area under closure, net pay thickness, porosity and water

saturation for each hydrocarbon zone of the A and B intervals. Volumetric

parameters for the Base Case "PA-PF" structure are listed in TABLE VII(d)

i. The Success Case for "PG" and "PH" is set forth in TABLE VII(d) ii. It

bears noting that the distinction of the various hydrocarbon zones in the

A interval are generally inferred from production tests of the BS-4, BS-9

and PBM-2 exploration wells. Determination of the cited hydrocarbon zones

is inhibited by A zone's poorer reservoir quality and interbedded nature.

Fluid properties of A and B zones are listed in TABLE VIIA-2. Of note is

the residual oil (ROS) and gas (RGS) saturation values of 40% and 45%

respectively. The assumed average value for ROS of 40%, which is common

for carbonate reservoirs, compares with values of 32% - 37% from data

provided in the data package for the highest-quality reservoir samples.

The high RGS value of 45% is consistent with the strong water-drive model

where reservoir pressure drawdown remains relatively low through the



field's productive life.

The methodology for volumetric calculations utilizes the B zone and A zone

structure maps to determine the area and resulting rock volume of each

cited hydrocarbon zone in the respective A and B intervals. Average values

for pay, porosity, hydrocarbon saturation were then utilized to calculate

oil and gas in place. Recoverable reserves were calculated by subtracting

ROS and RGS from the hydrocarbon saturation of the respective zones and

assuming a sweep efficiency for the natural water drive as follows:

A zone (gas) sweep efficiency

A zone (oil) sweep efficiency

B zone (gas) sweep efficiency

B zone (oil) sweep efficiency



=

=

=

=



70%

60%

95%

60%



Although calculated, no A zone recoverable oil reserves were included in

the Base or Success Cases because the oil occurs in a rim around the outer

perimeter of the field where it is beyond reach with the envisioned

development scheme that targets B zone oil and A zone gas reserves.

Comparison of volume per unit area calculations (e.g. MMt/square

kilometers) indicate that the A zone oil reservoir requires 5X the area of

the B zone oil reservoir to yield an equivalent volume of recoverable

reserves. Stated another way, for a given drainage area, the A zone will

yield 20% of the reserves delivered by the B zone. FIGURE VIIA-12 shows

the recoverable reserve uncertainty for the base case PA-PF structure

expressed as a log normal distribution on a log probability scale. It

indicates the following range:

PROBABILITY

>or =

----------(%)



RECOVERABLE

RECOVERABLE

Oil

Gas

--------------------(MMt)

(MMM cubic meters)



Minimum



90



12.1



7.25



Most Likely



50



16.2



10.00



Maximum



10



22.4



13.88



The most likely reserve range was utilized in the Base Case development

plan and production profile. Comparison of the oil inplace for the B zone

and recoverable B zone oil indicates a recovery factor of 23.8%. Gas

recovery for the A and B zones is 27.3%. This low gas recovery is a

function of the relatively high percentage of solution gas to total gas

volume (33.6%) and the relatively poor A zone reservoir quality and high

residual gas saturation assumed for the water drive model. Detailed

reserves by zone are listed in TABLES VIIA-(e)i for the base case, TABLE

VIIA-(e)ii for the upside reserves and TABLE VIIA-(e)iii for the combined

"Success case".

(d,e) PANNA PARAMETERS AND RESERVES

Please refer to TABLES VII A-(d)i, (d)ii, (e)i, (e)ii, (e)iii

(f)



PLANS FOR UTILIZATION OF GAS - PANNA

1.



The natural water drive characteristics of the Panna field are well

substantiated and therefore, no gas re-injection for pressure

maintenance is necessary. Instead, all effort will be made to avoid

flaring any gas volumes other than as necessary for optimum oil

production. It should be recognised that under some development

scenarios increased gas flaring will result from unavailability of

the GOI-owned gas transmission line. GOI approval for such temporary

flaring is presumed and is a condition of this bid.



2.



The need for gas lifting of producing wells is not an immediate

concern due to the flow capability of the producing wells. Adequate

gas lift gas is available and facilities to gather, compress and

distribute for either sale or gas lift is planned.



3.



Upon the installation of either a processing platform or other means

of compression and dehydration, gas sales will begin (expected no

later than July, 1995).



4.



Flaring until gas processing facilities are installed will be



minimised by flaring only gas associated with oil production.

5.



The proposed gas transportation option is a connection to the

planned 42-inch ONGC gas pipeline to Hazira. The connecting pipeline

will be built by the Bidder as part of the cost-recoverable work

program.



VIIB. TECHNICAL INFORMATION FOR MUKTA FIELD

(a,b,c)

1.



LOCATION

The 777 square kilometers Mukta block is located in the offshore

Bombay basin of India about 25 km east of the giant Bombay High

field and 25 km west of Panna field. It contains a complex of

relatively small structures that are positioned on the axial crest

of the west-plunging Heera-Bassein structural block. The Mukta block

lies approximately midway between two major NW-SE structural

elements that cut the Heera-Bassein nose. These include the Bombay

High fault to the west and the Central Graben to the east (FIGURE

VIIB-1). The numerous mapped structures of the block have been

geographically subdivided into three structural blocks or areas by

ONGC called B-57, B-19 and B-126. The B-57 and B-19 areas are

jointly called Mukta field. FIGURE VIIB-2 highlights the significant

structural closures and defines the B-57 seismic 3-D map area in

red.



2.



STRATIGRAPHY

Commercial hydrocarbons are trapped in multiple porous and permeable

shoal carbonate reservoirs of the Bassein B zone (Middle Eocene) and

sandstones of the underlying Early Eocene-Paleocene Basal Clastics

formation. The Bassen A zone (Early Oligocene) has tested high rates

of gas and condensate in several exploration wells but exhibits low

porosity and is considered to have limited reserve potential. The B

zone consists of 200 to 250 meters of tight mudstones and pelletal

wackestones interbedded with porous algal and fusillinid packstones

and grainstones. The impermeable lithologies form effective seals

for three major reservoir intervals called B upper, B middle and B

lower. No free water level was observed in the porous B zones

suggesting oil columns in excess of 70 meters. However, significant

water tests from apparent pay zones indicate that much of the oil

saturation is residual. The B zone overlies the Basal Clastics

formation which consists of 25 to 35 meters of shale underlain by 25

to 40 meters of porous and permeable sandstone. Hydrocarbon columns

appear to be in the range of 10 to 20 meters with a well defined

oil/ free-water contact.

The top of the B-zone is an unconformable surface overlain by 5 to

10 meters of thin shales and argillaceous limestones called the

Tight zone. The Tight zone grades upwards into the A zone. It

consists of 40 to 50 meters of low-porosity pelletal wackestones

which are in turn overlain by alternating shales and tight

limestones of the upper Bassein formation. The A zone is considered

to be a marginal gas reservoir and was not quantified in this

evaluation. Mappable seismic reflectors occur at the top A zone

(H3A), top B zone (H3B) and top Basal Clastics (H4) (FIGURE VIIA-2).



3.



STRUCTURE

FIGURE VIIB-3 is an ONGC structure map on top of the B zone in the

B-57 and B-19 area. The map is based on 2-D seismic data and

exhibits a series of interpreted NE-SW faults that separate and trap

B upper oil pools with columns up to 85 meters in thickness. A

generally-SW-NE diagrammatic cross section through the mapped area

depicts the interpretation (FIGURE VIIB-4). It demonstrates the

sealing nature of the faults and thick multiple hydrocarbons.

The seismic section, BS-423, located in FIGURE VIIB-5, reveals the

structural aspects of the same area shown in FIGURE VIIB-3 following

a WNW-ESE transect oriented normal to the cited fault trend (FIGURE

VIIB-6) and subparallel to the cross section of FIGURE VIIB-4. At

the approximate top of the Bassein (H3), shown in blue, the section

clearly shows a moderate relief structure on the east side that

corresponds to the position of the B-57-1 and B-57-12 exploration



wells and MA development platform. Another low-relief structure can

be seen on the western side which occurs in the B-126 area. The one

critical aspect of the previous interpretation that is not supported

by this hard data is any evidence of faulting in the Bassein

interval.

FIGURE VIIB-8 is a depth structure map on top B zone in the B-57

area. It was interpreted from a recent vintage 3-D seismic survey by

ONGC. It basically covers the same area as the previous 2-D

interpretation (FIGURE VIIB-3) and is mapped at the same structural

level. Areas of structural closure have been colored orange. The two

interpretations are radically different. The 3-D map shows no faults

in support of the hard seismic data (FIGURE VIIB-7) and depicts

relatively small closures on a SW plunging structural nose. The most

significant structure with approximately 30 meters of relief is the

MA platform structure which also agrees with the cited hard seismic

data.

From review of the data package and communications with ONGC

representatives in the negotiating sessions, it is the understanding

of EEC/RIL that reserves quoted by ONGC for the Mukta field do not

reflect the recent 3-D interpretation and are based on the cited 2-D

interpretation designed to account for the apparent large oil

columns. Based on the compelling evidence of the 3-D interpretation,

it is the position of EEC/RIL that the MA structure is the only

quantifiable feature available for a base case analysis at this

time. The subsequent volumetric evaluation of the MA structure

utilizes the ONGC 3-D B zone structure map and detailed log analysis

to derive base case reserves. The upside case assumes two appraisal

tests of features that are exactly 50% of the size of the MA

structure with one success and one dry.

4.



RESERVOIR CHARACTERIZATION

Core studies indicate that the B zone reservoirs have roughly half

of the porosity and a fraction of the matrix permeability observed

in the neighboring Panna block. The Mukta area appears to have been

the site of a lower-energy environment of deposition in comparison

to Panna. The sequence exhibits alternating low-energy finer-grained

carbonate and moderate-energy pelletal to fussillinid wackestones,

packstones and grainstones. Core descriptions indicate that like

Panna, the A and B zones have been subjected to sea-level lowering

and emergence which brought about diagenetic dissolution and general

enhancement of porosity and permeability. This secondary

macro-porosity and permeability seem to be critical to the excellent

fluid flow rates exhibited in both the exploration and development

wells in the block.

The occurrence of multiple tight and porous zones in the B interval

suggests cyclic emergence of a restricted shallow marine platform

environment. The stratigraphic thinning of the Bassein formation at

Mukta relative to Panna, 225 versus 325 meters, indicates that the

Mukta area was possibly in a higher paleostructural position during

Bassein deposition. It is located on the landward side of the Bombay

High structural block which is devoid of Bassein age sediments.

These observations suggest that the currently west-plunging

Heera-Bassein nose may have undergone structural rotation from a

previously east-plunging position with stratigraphic thinning and

pinchout of Bassein reservoirs on to the Bombay High block. This

paleostructural and stratigraphic setting provides the mechanism for

the trapping of a large volume of hydrocarbons in the Mukta area

prior to structural rotation in to its current setting.

FIGURES VIIB-7 through 11 show production test results by zone

overlain on the appropriate 3-D structure map for the B-57 area. A

similar set of production overlays are shown in FIGURES VIIB-12 to

15 on the 2-D ONGC structure maps of the B-126 area.

There are 3 water free gas tests of the A zone in the block which

are localized on defined structural closures in the north-east B-57

area in wells B-57-1, 2 and 7 (FIGURES VIIB-7 and 12). Poor or wet A

zone tests were recorded in the remainder of the area.

The B upper and B middle zones are the two most prolific intervals

in the block with 8 water free oil tests each. The B upper tested



rates up to 1900 BOPD and the B middle reported a maximum rate of

2083 BOPD from the BS-57-1. The better tests occur on defined

structural closures in the B-57 and B-126 areas with the exception

of well B-57-10 which tested water free rates of 408 and 1455 BOPD

respectively from the B upper and middle zones. The well is located

on a small WSW-plunging nose with no apparent closure implying a

stratigraphic component to the trapping mechanism. However, it bears

noting that other wells located on the regional SW-plunging nose

that runs diagonally through the B-57 map area are wet or have

tested high water cuts including B-57-5, 6, 17 and 18 (FIGURES

VIIB-8, 9, 13, 14).

The most structurally controlled interval in the Mukta block is the

B lower zone. It has three significant water free oil tests in the

block. Both the B-57-1 and 12 wells in the MA structure tested high

rates of up to 2314 BOPD (FIGURE VIIB-10). Also the structurally

highest mapped well in the B-126 area, B-126-1, reported an

excellent rate of 2286 BOPD (FIGURE VIIB-15). It is the

understanding of EEC/RIL that the MA platform was positioned and the

subsequent 8 development wells were drilled on the basis of the

cited 2-D interpretation in the B-57 area (FIGURE VIIB-3). An

important point to make is that the 3-D map matches extremely well

with the results of the completions in the B lower zone. Wells MA-1,

5, 6 and 7 are clearly at the edge of closure and tested water or

had high water cut except MA 7 which was not tested and has not been

completed. Another well (MA-2?) that was completed as a producer has

quit flowing (due to water encroachment?) leaving only three

currently producing wells. These results indicate that the 3-D maps

are reliable and that the B lower zone reservoir may have at least a

partial water drive mechanism. The pressure drawdown observed in the

development wells has been interpreted by ONGC as evidence for a

depletion drive mechanism. It is the position of EEC/RIL that

accurate bottom hole pressure monitoring and remediation of

cement/mechanical problems is required before accurate determination

of drive mechanism and reservoir modeling can be done. This would

provide the basis for any future pressure maintenance or waterflood

operations.

The Basal Clastics sandstone reservoirs have yielded significant

tests in 3 wells in the B-57 area (B-57-6, 12,18) and B-126 area

(B-126-2,4,5) respectively with rates up to 1540 BOPD (FIGURE B-16).

A certain degree of stratigraphic trapping seems to be occurring in

non-closed areas (FIGURES VIIB-11,15). This indicates reserves may

be difficult to quantify and conversely that all future exploration

and development wells should evaluate this interesting interval. All

development wells proposed in the Mukta base development plan are

scheduled to be Basal Clastics tests.

Detailed petrophysical analysis was done on straight-hole

exploration wells with complete modern log suites. TABLE VIIB-1

lists the petrophysical input parameters utilised for the density

porosity and Waxman-Smit water saturation calculations of the B zone

reservoirs and Archie water saturation calculations for Basal

clastics.

FIGURE VIIB-17 is a cross plot of BQV versus Porosity with an

interpreted trend line that provides an algorithum tying clay

conductance effects into the log analysis through the Waxman-Smit

water saturation model. Petrophysical analysis of the B zone

indicates that there is a distinct zonation of the hydrocarbon

interval as depicted on the type log in FIGURE VIIB-18. These zones

include the following :

ZONE BASE

--------Free Oil

Moveable Oil

Residual Oil



WATER SATURATION RANGE

---------------------15 to 30%

31 to 59%

60 to 100%



FIGURE VIIB-19 is a capillary pressure curve from a typical Mukta B

zone reservoir. It demonstrates that for water saturations of 20% or

less, oil columns of more than 100 meters are required to displace

the water from the low permeability matrix. It is clear from the 3-D

mapping that the largest closures at Mukta have around 30 meters of

relief as seen at the location of the type log of well B-57-12.



Clearly, none of the free oil zones exceed 30 meters of thickness in

the type log example nor do they in other exploration wells

examined. This observation combined with the presence of ubiquitous

residual oil saturation and lack of free water level in the Bassein

reservoirs supports the cited hypothesis of a large accumulation

that has been later breached or tilted leaving oil behind in

existing smaller structures and stratigraphic traps. The large oil

colums of a major accumulation would be required to achieve the free

oil saturations seen today and explain the top to bottom residual

oil saturation of the Bassein B zones.

FIGURE VIIB-20 is a diagrammatic Resistivity Index versus Water

Saturation plot. It provides an explanation of the effects on log

analysis of a breached or waterflooded reservoir. The straight line

represents the water drainage cycle of a normal reservoir that has

been filled with hydrocarbons over the course of geologic time. In

essence, oil has displaced water. The arcuate imbibition cycle line

represents a breached or flood reservoir where oil has been

displaced by water. The saturation exponent "N" is derived from the

slope of the lines. Clearly, for a given resistivity, the resulting

water saturation calculated would be much higher if the reservoir

was following the imbibition cycle rather than the water drainage

cycle. It is concluded that much of the original thick oil columns

mapped by ONGC and disappointing wet tests of apparent pay zones are

a product of this breached reservoir phenomena. Restricting pay

counts to the free oil zones provides a realistic minimum case and

gives the analyst a conservative approximation of oil column height.

Inclusion of the moveable pay provides a maximum case.

5.



VOLUMETRIC RESERVE CALCULATIONS

Volumetric input parameters, listed in TABLE VIIB-(d), depict the

maximum, minimum and average values of area under closure, net pay

thickness, porosity and water saturation for each hydrocarbon zone

for the B upper, middle, lower and Basal Clastic intervals.

Fluid properties of the B zones and Basal Clastics are listed in

TABLE VIIB-2. Of note is the residual oil (ROS) saturation value of

40% which is the same used at Panna.

The methodology for volumetric calculations of the base case MA

structure utilizes the B upper zone structure map to determine the

area and resulting rock volume of each cited hydrocarbon zone in the

respective B zones and Basal Clastics intervals. Values for pay,

porosity, and hydrocarbon saturation derived from analysis of the

B-57-1 and 12 wells and utilized to estimate oil and gas in place.

Recoverable reserves were calculated by subtracting ROS from the

hydrocarbon saturation of the respective zones and assuming a sweep

efficiency for partial water drive of 60%. Oil in place was

calculated using only the Moveable and Free oil zones. FIGURE

VIIB-21 shows the recoverable reserve uncertainty for the base case

MA-MB structure expressed as a log normal distribution on a log

probability scale. It indicates the following range :

PROBABILITY

>or =

----------(%)



RECOVERABLE

OIL

----------(MMt)



RECOVERABLE

GAS

----------(MMM cubic meters)



Minimum



90



4.1



0.46



Most likely



50



5.3



1.85



Maximum



10



6.7



3.57



The base case most-likely reserves represents an average between the

maximum case which combines moveable and free oil zone reserves and

a minimum case of free oil zone reserves only. Gas reserves occur as

solution gas and show a wide range from a maximum value derived from

total oil in place assuming a severe depletion pressure draw down of

the reservoir to a minimum based on pressure supported water drive

mechanism and straight GOR based volume related to oil produced.

Comparison of oil in place for the B zone and recoverable oil



indicates a most likely case recovery factor of 17.2%. Gas recovery

is 51.8% reflecting the partial water drive/depletion drive model

assumed for the reservoir. Reserves for the base case are listed in

TABLE VII B-(e)i. The upside is assumed to be 50% of the Base Case

reserves. The Success Case is a combination of the two as follows:



CASE

---Base

Upside

Success



RECOVERABLE

OIL

(MMt)

----------5.37

2.68

8.05



RECOVERABLE

GAS

(MMM cubic meters)

----------1.85

0.93

2.78



(d,e) MUKTA PARAMETERS AND RESERVES

Please refer to TABLES VIIB-(d)i, (e)i and (e)ii.

(f)



PLANS FOR UTILIZATION OF GAS - MUKTA

(i)



A study is needed to justify water-injection pressure maintenance.

No gas re-injection is contemplated.



(ii) After the MA permanent deck is installed at Mukta, appropriate

testing will be undertaken to determine the timing for gas lift gas

installation. Given the water production observed, the need for gas

lifting at some point is considered likely and provisions for this

eventuality have been made in the Base Case work program.

(iii) Apart from the gas requirement for internal use such as

power-generation and technical flaring, the bulk of the gas will be

available for sale after dehydration and compression.

(iv) During the producing life of the field efforts will be continuously

made to minimise flaring. Flaring of associated gas is presumed,

without GOI restriction, until the gas sales line is commissioned.

(v)

(g)



After hookup, gas not used in operation will be sold via Panna

facilities.



MONITORING SYSTEMS & RESERVOIR MANAGEMENT

1



MONITORING SYSTEM

Production of all fluids will be monitored on a well by well basis,

as well as on an aggregate basis as required by standard oil/gas

field practices. For effective operational control these production

rates will be recorded on a daily basis. For fiscal purposes,

production will be aggregated and reported monthly. An appropriate,

state of the art well testing system will be installed at each unit.

The field will be monitored locally at platforms and remotely from

the shore base. EEC/RIL intend to operate the satellite platforms

unmanned to the extent possible and to use computer-assisted

operations to monitor ongoing performance.



2



RESERVOIR MANAGEMENT

Reservoir Management will be carried out through conventional

surface as well as down hole monitoring systems, such as bottom hole

pressure surveys, production testing and well deliverability testing

at prescribed intervals. This data will be analysed at regular

intervals, but at least once a year to study the reservoir

performance and to ascertain the reservoir drive mechanism. The

operations will be adjusted to maximize economic recovery. It is

envisioned that a suitable mathematical model will be used and

updated as and when required.



VIII PROPOSED PANNA/MUKTA WORK PROGRAMME

(a)



CONCEPTUAL DEVELOPMENT PLAN

Data Package material provided by GOI demonstrates a significant potential

for increased reserves at Panna/Mukta in the event of exploration

success(the Success Case). Described below is a staged development scheme

in which Stage I provides a building block towards the expansion needed in



the Success Case. The Success Case arises in the event of positive results

from exploratory wells included in the EEC/RIL firm work commitment. The

fully developed Success Case is described first so that the integrated,

building-block nature of Stage I is apparent. The firm work programme bid

by EEC/RIL commits to all items needed for Stage I(the Base Case); we are

dedicated to full Success Case development in the event of exploration

success. The risk of such exploration work precludes a firm commitment to

additional platforms, pipelines and development wells until the additional

reserves are conclusively demonstrated.

1



SUCCESS CASE DEVELOPMENT (29.5 MMt or 224 MMBO remaining recoverable

oil reserves)

EEC/RIL are proposing four exploratory wells as part of the firm

work programme. We believe, because of exploratory wells previously

drilled in the Panna G and H areas, that both of these areas are

likely to contain commercially viable accumulations. In addition,

several Mukta area wells have shown encouraging results. As a

result, we assume that one of the two exploratory tests proposed at

Mukta will also yield a commercially viable develop the Panna/Mukta

fields will require (See FIGURE VIII-1):

- 8 Well platforms at Panna

- 3 Well platforms at Mukta

- 1 Common 45,000 BOPD processing facility

(INCLUDING LIVING QUARTERS)

- 1 Inter-field (Mukta-Panna) well fluid pipeline and gas lift line

(POSSIBLY ALSO A WATER FLOOD LINE)

- 84 Development wells

- 1 Export gas line

EEC/RIL are capable of developing a highly accelerated production

schedule but, to do so, require the full support and cooperation of

GOI.



2.



BASE CASE DEVELOPMENT (155 MMBO or 20.4 MMT or remaining recoverable

oil reserves)

This case corresponds to RIL/EEC's committed work programme and is

not a reflection of our expectations, which are reflected in the

Success Case. The extensive drilling campaign conducted by ONGC has

demonstrated the viability of developing a large area on Panna and

supports the installation of one additional platform at Mukta. The

development plan and schedule are illustrated in FIGURES VIII-2,

VIII-3 and includes:

-



6 Well platforms at Panna

2 Well platforms at Mukta

1 Common 45,000 BOPD processing facility and living quarters.

1 Interfield (Mukta-Panna) well fluid pipeline and gas lifline

(POSSIBLY ALSO A WATERFLOOD LINE)

- 67 Development wells

- 4 Exploratory wells

- 1 Export gas line

The Base Case assumes that a sour gas export line will be laid from

PPA to an interconnect on the proposed ONGC 42-inch sour gas line

and that the 42-inch line will be available no later than April 1,

1995.

3



ACCELERATED DEVELOPMENT

A limited, unique window of opportunity could exist wherein EEC/RIL

may acquire an existing, operating 40,000 BOPD Floating Production

System (FPS) capable of a significant acceleration of the

availability of processing at a major cost saving to GOI/EEC/RIL.

This approach would have positive early cash flow implications to

all concerned and obviously enhances the value of the project to a

major degree (See FIGURE VIII-4). Uncertainty about securing the

facility preclude bidding the project based on acquiring the unit.

However, EEC/RIL commit to a "Best Efforts" ("Reasonable

Endeavours") attempt to acquire the unit if GOI will commit by July

26, 1993 to awarding the requested blocks to EEC/RIL.



(b)



PANNA/MUKTA WORK DEVELOPMENT



Since Panna/Mukta development has started, a baseline must be established

so that the transition from ONGC to EEC/RIL is clearly defined.

Accordingly, following are sections defining status of the development,

specifying ONGC activities which we presume will be completed and then

future work which EEC/RIL commit to undertake.

1.



STATUS AS OF JULY 1, 1993

The following facilities have been installed and placed into service

by ONGC:

-



1 Well platform PA

8 Wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8)

Early Production System, "EPS" (Jack-up)

Tanker Loading via SBM

PB, PD, PE (Jackets only) installed; well fluid line

connecting each to EPS.

23 Development wells drilled in PB, PD, PE.

MA (Jacket only) installed.

8 Development wells drilled in MA

14" well fluid pipeline connects MA to Panna EPS.



We understand that The Panna EPS is currently processing

approximately 13,000 BOPD derived from the PA, PB, PD, PE and MA

platforms against a design capacity of 10,000 BOPD. Production rates

and bottomhole pressures for individual wells on the PB, PD, PE and

MA platforms cannot currently be measured due to the temporary

decks. Efforts are being made to balance reservoir withdrawals

areally and to minimise gas production, all of which is being

flared.

2.



WORK PLANNED AND COMMITTED BY ONGC

We understand that ONGC has work in progress on certain projects

related to ongoing Panna/Mukta development. In formulating the bid,

EEC/RIL have assumed that ONGC will design, fabricate and install

permanent decks and facilities for the PB, PD, PE and MA jackets at

its own cost. The bid assumes that the decks and facilities will be

installed and commissioned according to the following schedule:

PB - fourth quarter, 1993; PD - first quarter, 1994; PE - second

quarter 1994, MA - first quarter 1994. Early installation of these

deck packages is considered imperative to monitor and optimise

reservoir performance.

EEC/RIL would be willing to negotiate the following alternatives to

the above:

- EEC/RIL assumption of responsibility for fabrication of one or

more of the deck packages currently under construction

- EEC/RIL would prefer to manage the deck installation

- EEC/RIL would be willing to locate, purchase and refurbish used

deck packages or fabricate new deck packages to substitute for

those under fabrication by ONGC, if this does not result in any

delay in project timing.

We understand that ONGC has committed to drilling two horizontal

wells from PD and two horizontal wells plus two horizontal

completions from PE in the second half of 1993. The bid assumes

that EEC/RIL will have the option, but not the obligation, to

accept assignment of any or all drilling rig, service and supply

contracts and will perform the work at GOI/EEC/RIL expense

(subject to cost recovery).

WORK TO ACHIEVE BASE CASE DEVELOPMENT

EEC/RIL are committed to proceeding with the Base Case development.

EEC/RIL plan to pursue a very aggressive development schedule

(FIGURE VIII-3) which can only be achieved with the active

assistance of ONGC and GOI authorities.



3.



WORK PLAN OFFERED AND COMMITTED BY EEC/RIL



PANNA

-



Drill two horizontal wells from PD

Drill two horizontal wells from PE

Complete two horizontal wells from PE

Fabricate and install PC and PF jackets

Fabricate (or refurbish) and install PC and PF deck

packages

Drill nine horizontal wells from PC

Drill nine horizontal wells from PF

Fabricate and install PPA and PQ

Lay necessary well fluid, gaslift and free gas lines

Lay sour gas export line from PPA to proposed ONGC

42-inch pipeline

Drill two exploratory wells

Geophysical, geological and engineering studies.



MUKTA

-



Fabricate and install MB jacket

Fabricate (or refurbish) and install MB deck package

Drill six directional wells from MB

Lay MB-MA wellfluid line

Lay PPA-MA-MB gaslift line

Drill two exploratory wells

Geophysical, geological and engineering studies



Please note that a second EPS is included in the Base Case

development plan. However, a firm commitment has not been made since

the economics are marginal (if new construction is required) and

highly sensitive to project timing and EPS cost.

(c)



DEVELOPMENT WORK COMMITMENT

EEC/RIL will immediately begin, the design and fabrication of a jacket and

deck for location PC. If available, a used deck will be acquired and

refurbished; otherwise, a new deck will be fabricated (EEC/RIL plan to

install used decks wherever possible to minimise costs). A new nine-slot

jacket will be fabricated for PC. At the time of jacket installation, nine

conductors will be driven. As soon as the PC jacket is installed and

drilling on PD and PE is completed, the rig will be moved to PC and nine

horizontal wells will be drilled. EEC/RIL plan to employ a single rig to

drill all Panna horizontal wells to take advantage of the associated

learning curve to minimise drilling time and cost. After drilling is

completed, the rig will be moved to PF and the deck will be installed on

PC. Production will commence from PC as soon as a well fluid line is

installed. Drilling prior to deck installation on PC will allow production

to be significantly accelerated due to the lead time required to prepare

the deck package.

Nine horizontal wells will also be drilled from PF. However, in this case,

the deck package will be available and installed prior to drilling. This

approach has the advantages of allowing produce-while-drilling operations

to accelerate production and raising the wellheads further above the

splash zone.

Work will commence immediately on the design and fabrication of a new

jacket for MB. Six directional wells will be drilled from MB and should be

completed at the time the MB deck package becomes available (pre-monsoon

1995). Production will ensue after the installation of the deck package

and a wellfluid line from MB to MA is installed.

Work will commence immediately on the design and fabrication of a new

45,000 BOPD production processing jacket and deck (PPA) as described

below:

FUNCTIONAL/DESIGN BASIS

-



Production and Test Manifolds

Production and Test Separation

Gas Compression

Gas Dehydration

Chemical Injection (Corrosion Inhibition)

Produced Water Treatment, Disposal



-



Power Generation

Safety systems

Fire Protection

Utilities



STRUCTURAL BASIS

-



8-Pile

86'x160' Deck

Structural Redundancy

Earthquake Zone IV Design



PPA is expected to be available for installation pre-monsoon 1995.

Work will also commence immediately on design and fabrication of a

separate 100-man quarters platform (PQ).

Although not currently in the Base Case development plan, studies will be

conducted to ascertain the merit of combining PPA and PQ. In addition, the

desirability of a manifolding platform (PLM), possibly combined with PQ,

will be investigated. A manifolding platform may be justified given the

large number of lines associated with the producing platforms, riser loads

on PA and the future connections and disconnections associated with the

Sagar Laxmi (EPS-I), the second early production system (EPS-II) and the

PPA.

Work will begin immediately to secure a jack-up suitable for conversion

(preferably already converted) for service as a second early production

system (EPS-II) of 10,000 BOPD capacity. If such a unit can be secured at

a cost and within a time frame that project economics are enhanced, it

will be implemented. Installation of EPS-II would occur post-monsoon 1994

and would allow Panna/Mukta production processing capacity to be expanded

to 20,000 BOPD at the beginning of 1995. EPS-II will allow considerable

acceleration of oil production prior to the commissioning of PPA. In

addition, the Sagar Laxmi and EPS-II can be retained temporarily after the

installation of PPA to process as much as 65,000 BOPD in the event

production exceeds expectations or the Success Case is achieved. Although

EEC/RIL have included the installation of EPS-II in discussion, additional

economic analysis will be conducted to confirm that the acceleration of

oil production justifies the additional expense.

The need for future gas lift and free gas lines is anticipated. The lines

will be installed when required by field performance and when convenient

in terms of lay barge utilisation. A long gas lift line from PPA to MA and

MB will almost certainly be required, whereas a free gas line should be

unnecessary.

Preliminary EEC/RIL studies indicate that a significant possibility of

communication between the Panna A-zone and B-zone exists. As a result,

EEC/RIL intend to defer production from the A-zone gascap to maximise oil

recovery. However, although every effort will be made to minimise gas

production, elevated gas-oil ratios are inevitable given the thin oil

column and free gas lines may become necessary prior to gascap blowdown.

The Base Case assumes that a gas export line may be laid from PPA to a

connection with the proposed 42-inch ONGC gas pipeline to Hazira. It is

assumed that line installation would occur pre-monsoon 1995 with resulting

gas sales in July, 1995, that 100% of Panna/Mukta gas will be taken and

that oil production will not be restricted by gas flaring considerations.

As an alternative not considered in the Base Case, EEC/RIL is studying the

possibility of constructing a sour gas pipeline to the Bombay area and

constructing onshore sweetening plant.

EEC/RIL assume that suitable shore base facilities (including dock space,

yard space, warehousing, communications) will be made available for lease

to support Panna/Mukta operations.

(d)



EXPLORATION WORK COMMITMENT

Two exploratory wells will be drilled at Panna and two at Mukta. These

wells will be drilled as soon as possible by either of the two rigs after

firm locations are established and when the development drilling schedule

allows.The wells must be drilled early enough to allow timely jacket and

deck commitments to be made in the event of success to ensure minimum

delay in the development program. Details of the program are as follows :



PANNA

SEISMIC - Reprocess and interpret all usable data in concession

Commitment



:



850 +/- km



DRILLING - Drill and evaluate 2300 +/- meter delineation tests. Penetrate

base of Basal Clastics (Paleocene-Early Eocene) below B Zone (middle

Eocene) limestone. Maintain options to test, complete and suspend at

mudline if results warrant.

Commitment



:



2 wells



POTENTIAL RESERVES

Based upon the assumption that both of the above mentioned delineation

tests are successful, inplace and recoverable reserves are provided in

TABLE VIIA-(e). For this purpose, we have assumed that the tests will be

on Panna structures PG and PH (FIGURE VIIA-3). However, after reprocessing

and interpreting seismic (SEE ABOVE WORK COMMITMENT), the best two

structures will be selected and drilled.

MUKTA

SEISMIC - Reprocess and interpret the 1988-89 3D survey (150 sq.km, 4100

+/- line km) and all usable data from 1991 SBS 2D survey (750 +/- km).

Commitment



:



Processing and interpretation as

noted above.



DRILLING - Drill and evaluate two 2300 +/- meter delineation tests.

Penetrate to base of Basal Clastics (Paleocene-Early Eocene) below B Zone

(middle Eocene) limestone. Maintain options to test, complete and suspend

at mudline if results warrant.

Commitment



:



2 wells



POTENTIAL RESERVES Based upon the assumption that one of the above

mentioned delineation tests is successful, inplace and recoverable

reserves are expected to increase by 50% those provided in TABLE

VIIB-(e)ii. After reprocessing and interpreting seismic (SEE ABOVE WORK

COMMITMENT) the best two prospects will be selected and drilled.

f)



OTHER COMMITMENTS

EEC/RIL have committed to a Base Case development plan based upon data

packages prepared by GOI. Upon contract signature, it is assumed that all

relevant information will be provided to EEC/RIL and that key ONGC

personnel will be made available to allow optimization of the development

plan. Based upon this information, EEC/RIL will perform the following

technical work the results of which will be shared with GOI.

PANNA

The Panna field oil accumulation is relatively thin and lies between an

active aquifer and a gascap. Optimum oil recovery will be achieved by

minimising gascap gas production thereby minimising movement of the oil

bank into the gascap (which results in unrecoverable residual oil

saturations in the gascap) and maintaining reservoir energy. EEC/RIL

believe that the added expense of drilling horizontal wells will be more

than made up by the increase in productivity index such completions will

achieve.

EEC/RIL intend to conduct single well simulations to determine the optimum

completion interval placement with respect to the fluid contacts, optimum

production rate and optimum horizontal completion length.

The results of detailed geological modeling, PVT analysis, petrophysical

analysis and well performance studies will be used to prepare a 3-D

full-field reservoir simulation model for the Panna field. The model will

be used to optimise areal well placement and platform locations. Analysis

of fluid contact movements and areal balancing of withdrawals will be

conducted. The model will be used to forecast fluid production rates and

pressure changes and will be used to determine the optimum time for gas



cap blowdown. History matching will be complicated by the lack of

individual well data concerning PB, PD and PE and by the lack of current

gas production measurements.

Drilling and completion studies will be conducted to minimise costs and

formation damage. EEC/RIL are experienced in the drilling of horizontal

wells and hope to meet or exceed ONGC performance. In particular, we

believe that great improvements in current cementing and formation damage

control practices can be made.

MUKTA

The drive mechanism controlling the lower B Zone reservoir performance

cannot be conclusively determined at present since the temporary deck at

MA precludes individual well testing and bottomhole pressure measurements.

One of the MA wells has ceased to produce, probably due to water

production, and significant water production is occurring from one or more

of the remaining wells. In addition, flowing wellhead pressures are

declining. Based upon this evidence, as well as geological considerations,

we currently assume that the reservoir is producing with a partial water

drive. Early installation of the permanent MA deck is considered vital to

allow well testing and bottomhole pressure measurement to identify the

drive mechanism.

Once appropriate data has been collected, reservoir engineering studies

will be conducted (probably 3-D reservoir simulation) to optimise the

development plan. Due to the observed water production, gas-lifting will

almost certainly be required and is therefore included in the Base Case

commitment.

Waterflood facilities and pipelines are not included in the Base Case

commitment since the necessity of water injection has not been

established, however, PPA will include deck space and utilities to allow

for subsequent addition of injection facilities if justified. The

requirements for water injection facilities will be identified shortly

after testing the MA wells and measuring bottomhole pressures. The risk of

premature water breakthrough and poor sweep efficiency in the naturally

fractured reservoir must also be assessed. Pressure transient analysis

will probably be used to confirm well interference and analyze dual

porosity behavior. If these preliminary studies indicate that

waterflooding might be beneficial, a pilot waterflood using one of the EPS

units at MA could be conducted. If the above studies indicate that

waterflooding is economically viable, EEC/RIL will proceed to install the

necessary infrastructure.

The MA wells penetrate four reservoirs which appear to be effectively

sealed from each other. EEC/RIL therefore intend to drill directional

wells from MB to penetrate multiple pays. Engineering studies will be

conducted to optimise the completion design and depletion plan - single

completions, single completions with sliding sleeve or tubing selectives

or dual completions. As the reservoir mechanism becomes better understood,

horizontal drilling applications may become evident.

g)



PANNA/MUKTA FACILITIES



Systems analysis (nodal analysis) will be conducted to optimise surface

and subsurface equipment design and operation.



Appendix-3

WORK PROGRAM COMMITTED BY EEC/RIL

PANNA

o

Drill and complete two horizontal wells from PD

o

Drill and complete two horizontal wells from PE

o

Complete two horizontal wells from PE

o

Fabricate and install PC and PF jackets

o

Fabricate (or refurbish) and install PC and PF deck packages

o

Drill nine horizontal wells from PC

o

Drill nine horizontal well from PF

o

Fabricate and install PPA and PQ

o

Lay necessary well fluid, gaslift and free gas lines

o

Lay sour gas export line from PPA to proposed ONGC 42-inch pipeline

o

Drill two exploratory wells

o

Geophysical, geological and engineering studies

MUKTA



o

o

o

o

o

o



Fabricate and install MB jacket

Fabricate (or refurbish) and install MB deck package

Drill six directional wells from MB

Lay MB-MA wellfluid line

Lay PPA-MA-MB gaslift line

Geophysical, geological and engineering studies







YEAR

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25



Appendix - B1

Appendix - B2

Appendix G

Figure G-1

Figure VIIA-1

Figure VIIA-2

Figure VIIA-3

Figure VIIA-4

Figure VIIA-5

Figure VIIA-6

Figure VIIA-7

Figure VIIA-8



APPENDIX H

ESTIMATED PRODUCTION PROFILE OF THE

PANNA AND MUKTA FIELDS

Oil

(THOUSAND BARRELS

PER YEAR)

1098

1098

3285

6256

13922

12693

10954

9516

8735

7913

7179

6549

5997

5511

7655

6502

5579

4899

4407

3792

3260

2834

2355

1986

1695



Gas

(MILLION CUBIC METERS

PER YEAR)

0

0

100

201

566

521

456

402

493

484

479

473

470

467

527

521

513

507

549

581

564

552

354

232

159



140

GRAPHICAL CONTENT APPENDIX

Map of Contract Area - Panna Block

Map of Contract Area - Mukta Block



Panna and Mukta Field Development Base Case Reserves

Regional Seismic Map on Early Eocene Top (H4) - Panna Field

Generalised Stratigraphy - Panna Field

Structure Contour Map on Top of B Zone - Panna Field

Structure Contour Map on Top of A Zone - Panna Field

Time Structure Map H3B - Panna Field

Scheme of Seismic Profiles - Panna Field

REA Bombay High INE BS-425A (Migrated) - Panna Field

B-Schematic View of Ground Water System and Development/

Destruction of Porosity in "B" Zone (Middle Eocene) - Panna

Field

Figure VIIA-9 A-Schemiatic View of Ground Water System and Development/

Destruction of Porosity in "A" Zone (Early Oligocene) - Panna

Field

Figure VIIA-10 Geological Section Across Panna Field

Figure VIIB-1 Regional Map at H4 Level

Figure VIIB-2 Isochron Map at the Top of Basal Clastics (H4) - Mukta and

B 126 Fields

Figure VIIB-3 Structure Map on Top of B-Upper Reservoir - Mukta Field

Figure VIIB-4 Geological Section Across Mukta and B 126 Fields

Figure VIIB-5 Scheme of Seismic Profiles

Figure VIIB-6 Area Bombay High Line BS-423

Figure VIII-3 Panna/Mukta Development Schedule Revised Base Case

Figure VIIB-7 Isochron Map at the Top of A-Zone (H3A) - Mukta Field (Based

on 3D Data)

Figure VIIB-8 Structure Map on B-Upper Top - Mukta Field (Based on 3D Data)



Figure VIIB-9

Figure VIIB-10

Figure VIIB-11

Figure VIIB-12

Figure VIIB-13

Figure VIIB-14

Figure VIIB-15

Figure VIIB-16

Figure VIIB-17

Figure VIIB-18

Figure VIIB-19

Figure VIIB-20



B Upper Zone - Production Test Results

Structure Map on B-Upper Top - Mukta Field (Based on 3D Data)

B Middle Zone - Production Test Results

Structure Map on B-Upper Top - Mukta Field (Based on 3D Data)

B Lower Zone - Production Test Results

Isochron Map at the Top of Basal Clastics (H4) - Mukta Field

(Based on 3D Data)

Structure Contour Map at the Top of B-Upper - B 126 Field

A Zone - Production Test Results

Structure Contour Map at the Top of B-Upper - B 126 Field

B Upper Zone - Production Test Results

Structure Contour Map at the Top of B-Upper - B 126 Field

B Middle Zone - Production Test Results

Structure Contour Map at the Top of B-Upper - B 126 Field

B Lower Zone - Production Test Results

Structure Contour Map at the Top of B-Upper - B 126 Field

Basal Clastrics - Production Test Results

Clay Conductance - Mukta Field

Type Log - Mukta Field

Capillary Pressure (Centrifuge) Data - Mukta Field

I-SW Plot