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 PRODUCTION SHARING AQUUSMm
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BETWEEN











INTERIM JOINT REGIONAL ADMINISTRATION OE


NORTHERN IRAQ


REPRESENTED BY





IHiGIONAL GOVERNMENT (SULAIMANlYAJj)





AND


GENEL ENERJI A.S.














DATED


JULY 17,2002


























W\' riKij* (Ci*uwt>


 TARI L W (,\)NTFNTS





Preamble ................................... M M •••••#••••••••• ••»••»•••••*•••••••! •••*••••• t *#• « .....





Article 1 1 SCI 1II1110113.. ,•»..........................................................................


Article 2

Article 3 Affrccmcni aics ■ --- 1





Article 4 Agreement Term ........................................................ .....1


Article 5 KcliiKiuishmcnts ....... ............................................ .......... .....13


Article 6 ( 'll-imlmutinn ( OinUUtU' .............................. .....13


' w WIMIIHMIWH VVIIIIIIIItVV IM""


Article 7 Operator Responsibility.......................................................... ..... 16


Article 8 Procedure for Determination of Commcrciality and


Approval of Development Plans---------------------------------


..... 17


Anicle 9 Annual Work Programs and Budgets...................................... ......20


Anicle 10 Allocation of Production, Recovery of Costs and Expenses,


Production Shannp And Riidit ot ...... 22


Article 11 Crude Oil Valuation............................................................... --- 24


Anicle 12 Ancillary Rights of the Contractor and Operalor . __25


Article 13 Assistance Provided by the Goventorate --------------------- --- 27


Article 14 Measurement, Quality and Valuation of Petroleum............. __28





Article 15 .....29





Article 16 Tm/PIkaI Regime .......................... ............ .....32


Article 17 Accounting. Financial Reporting and Audit ... ......- ___33


Article 18 Currency, Payments and Exchange Control . . ................ __33


Article 19 Inttviri md Fvnnvt ... .........





Article 20 Export of Hydrocarbons, Transfer of Ownership


and Regulations for Disposal..................................................


Article 21 Ownership of Assets.............................................................





Article 22 Insurance, Environment. Health. Safety and Liability........... .....36


Article 23 Personnel....................................................................... .....40


Article 24 Force Majeure......................................................................


Anicle 25 Assignments and Guarantees.......................................................41


Article 26 Agreement Enforcement and Stabilisation and Representations


Article 27 Notices and Confidentiality.........................................................45


Article 28 Termination and Breach............................................................. 47


Article 29 Dispute Resolution................... 47


Article 30 Text------------------------------ 48


Article 31 Approval and Effective Date.................................... 48


ANNEX A AGREEMENT AREA................................ Total (I) page


ANNEX B ACCOUNTING PROCEDURE ..................... Total (21) pages


ANNEX C MINIMUM PROGRAMME ........................ Total (I) page


 This Agreement is made and entered into on July 17, 2002 by and between





(1) Regional Government of Sulaintaniynli (hereinafter referred to as


"Govemorate"), of the Interim Joint Regional Administration of Northern Iraq


(hereinafter referred to as "Northern Iraq Administration") as the party of the first


part;


(2) as party of the second part. Gcncl Encrji A S (hereinafter referred to as








The Northern Iraq Administration aml'or Govemorate and the Contractor may


sometimes be referred to as “Party" and collectively as the "Parties"


WITNESS!. TH:


WIIERF.AS. Patriotic Union of Kurdistan and Kurdistan Democratic Party together


with the Department of State of the United Slates of America entered into the Final


Statement on September 17. 1998 in Washington D C. (hereinafter referred to as


“Final Statement-)


WHEREAS, the Final Statement is determining the administration of the Northern


Iraq as well as the governmental rights.


WHEREAS. Northern Iraq Administration, in the context of its commitment to Iraq's


ten itonal integrity; enters into this Agreement wishing to promote the development of


the Agreement Area and Contractor desires to join and assist in the exploration,


development und production of the potential resources within the Agreement Area.


WHEREAS, Contractor has the requisite technical, managerial and financial


capabilities and experience to carry out Petroleum Operations stipulated in this


Agreement and desires to co-operate with the Northern Iraq Administration for the


exploration and exploitation of Petroleum reserves within the Agreement Area;


WHEREAS. Govemorate is the current holder of the oil and gas usage right in respect


of the Agreement Area (hereinafter referred to as the “License") and the License is to


be reissued lo the Contractor, and





WHEREAS the Parties have agreed that in order to promote the development of


hydrocarbon resources in Northern Iraq Administration and to promote international


investment in Northern Iraq Administration. Petroleum Operations should be earned


out pursuant to the terms of this Agreement.


NOW. THEREFORE, in consideration of the promises and the mutual covenants and


conditions herein contained, it is hereby agreed as follows;














4


 ARTICLE 1


DEHHmoaS





The following words and terms used in this Agreement shall unless otherwise


expressly specified in this Agreement have the following respective meanings:


1.1 •'Accounting Procedure" means the accounting procedure set out in Annex


“B~ hereto


1.2 An "Affiliated Company" or “Affiliate" means:


with respect to a Contractor Party: a company, corporation, partnership or


other legal entity:


i) in which a Contractor Party owns directly or indirectly more than fifty


percent (50%) of the shares, voting rights or otherw ise has the right to


establish management policy-, or


ii) in which at least fifty percent (50%) of the shares or voting rights arc


owned directly or indirectly by a company or other legal entity, which


owns directly or indirectly more than fifty percent (50%) of the shares,


voting rights or otherwise has the right to establish management policy


of a Contractor Party;


1.3 "Agreement” or "PSA" means this Production Sharing Agreement together


with all attached Annexes and any variation, extension or modification hereto


which may l>c agreed in writing by all the Parties.


1.4 “Agreement Aren" means the area specified in Article 3 hereof and delineated


in Annex A, us reduced or enlarged from time to time in accordance with the


provisions of this Agreement.


1.5 “Agreement Year" means a period of twelve (12) consecutive months from the


Effective Date within the term of the Agreement


1.6. ".Annex” or "Annexes" means each or all of the Annexes “A" through D"


attached to this Agreement and made a part hereof. In the ev ent of a conflict


between the provisions of an Annex and a term in the main body of this


Agreement, the provisions of the latter shall prevail.


1.7 "Appraisal" means all works carried out by Contractor to evaluate and


delineate the commercial character of a Discovery of Petroleum in the


Agreement Area.


1.8 “Appraisal Program" means a work program submitted by Contractor under


which Contractor plans to evaluate and delineate a Discovery of Petroleum in


the Agreement Area.











5


1.9 "Associated Natural Gas” means all gaseous hydrocarbons produced in


association with Crude Oil, which Crude Oil itself can be commercially


produced and separated therefrom.


1.10 "Authority" means any authorised body of the Northern Iraq Administration


and/or Govcmoratc;


I II "Available Crude Oil" means Crude Oil produced and saved from the


Agreement Area ami not used in Petroleum Operations in accordance with


Article 10 3.


1.12 "Available Natural Gas" means Natural Gas produced and saved from the


Agreement Area and not used in Petroleum Operations in accordance with


Article 10.3.


1.13 "Barrel" means a quantity consisting of forty-two (42) United States gallons


liquid measure, corrected to a temperature of sixty degrees (60*) Fahrenheit


with pressure at sea level.


114 "Budget” means the estimate of the expenditures, listed category-by-category,


relating to Petroleum Operations and contained in any Work Program


proposed by Contractor.


1.13 "Calendar Quarter" or “Quarter” means a period of three consecutive months


beginning on January’ April 1st. July 1st and October 1st of each Calendar


Year.


16 1. "Calendar Year” meant a period of twelve (12) consecutive months beginning


on January 1st and ending on December 31st in the same year, according to


the Gregorian Calendar.


1.18 "Capital Expenditures" means Development Expenditures Exploration


Expenditures and Drilling Costs.


1.19 "Commercial Discovery” means a discovery of Petroleum that the Contractor


in its sole discretion in accordance with the provisions of Article 8 commits


itself to develop and produce under the terms of the Agreement.


1.20 "Commercial Production" means regular and continuous production of


Petroleum from a Development Area in such quantities (taking into account


any other relevant factors) as are worthy of commercial dev elopment.


1.21 •"Contractor" means Gcncl Enerji A S., as provided herein.


1.22 "Co-ordination Committee" means the committee composed of representatives


of the Contractor and the Govemorate constituted in accordance with Article


6.


1.23 "Cost Recovery Petroleum" means Cost Recovery Crude Oil and Cost


Recovery Natural Gas.


1.24 -Cost Recovery Crude Oil" is defined as set forth in Article 10.4.


6


1.25 "Cost Rocovcry Natural Gas" is defined as scl forth in Article 10.4


I 26 "Cost* and Expenses" comprise the Exploration Expenditures. Development


Expenditures, Operation Expenses and Drilling Costs together with Finance


1.27 Costs whether directly or indirectly incurred by Contractor


"Crude Oil" means crude mineral oil. asphalten. oA>phcntc and all kinds of


hydrocarbons whether in a solid, liquid or mixed state at the wellhead or


separator or which is obtained from Natural Gas through condensation or


1.28 extraction


"Cumulative Production” means the cumulative total crude oil production less


Reserved Crude Oil from the Agreement Area commencing from the date of


1.29 the Transfer of the Operations of the Field to the Contractor.


"Current Legislation" means laws, legislative acts, and normative documents


that arc effective on the Effective Date in the Northern Iraq Administration.


130 "Customs Duties" means all import (or export) tariffs and duties and other


mandatory payments as stipulated by applicable laws, regulations or other


legal measures of Northern Iraq Administration with respect to the import or


131 export of materials, equipment, goods and any other similar items.


"Development Area" means all or any part of the Agreement Area specified in


on approved Development Plan.


1.32 "Development Expenditures" means all Costs and Expense* for Development


Operations with the exception of Operation Expenses and Drilling Costs


whether directly or indirectly incurred, including but not limited to training,


133 administration, service. Finance Costs ard related expenses


“Development Plan" means the plan to be produced by Contractor in


accordance with Article 8.6. following a declaration that Commercial


1.34 Production may be established.


“Development” or "Development Operations" or “Development Work" means


and includes any activities or operations associated with work to develop


Petroleum for production and subsequently to produce and render Petroleum


marketable for commercial sale and shall include, but not limited to:


a) all the operations and activities under the Agreement with respect to


the drilling of wells, other than Exploration wells, the deepening,


reworking, plugging back, completing and equipping of such wells,


together with the design, construction and installation of such


equipment, pipeline or gathering lines, installations, production units


and all other systems relating to such wells and related operations in


connection with production and operation of such wells as may he


necessary in conformity with sound oil field practices in the


international Petroleum industry.


 b) all operations ami activities relating lo the servicing nnd maintenance


of pipelines, gathering lines, installations, production units and all


related activities for the production and management of wells including


the undertaking of re-pressurising, recycling and other operations


aimed at intensified recovery, enhanced production and oil recovery


rate.





1 35 "Discovery" means a well that the Contractor determines has encountered


Petroleum, which would justify- Commercial Production.


1.36 "Dollar” or “U.S.S” means the currency of the United States of .America.


1.37 "Double Tax Treat/' means any international treaty or convention for the


avoidance of double taxation of income and or capital which is applicable or


will be applicable in the future, in Northern Iraq Administration.


1.38 "Drilling Costs" means all expenditures whether directly or indirectly incurred


during F.xploration and Development for well drilling, completing and


reworking operations including, but not limited to, labor, geological design,


engineering and other Subcontractors (including all fees, tariffs and charges


payable to any such Subcontractors), material and equipment consumed or


lost, perforation, formation testing, cementing, well-logging and


transportation.


1.39 "Effective Date" menns the date on which this Agreement has been signed by


all Parties nnd the requirements of Article 31 have been satisfied.


1.40 “Excess Associated Natural Gas" is defined as set forth in Article 15 1.lv


1.41 “Exploration” or “Exploration Operations” means operations conducted under


this Agreement in connection with the exploration for previously undiscovered


Petroleum, or the evaluation of discovered reserves which shall include


geological, geophysical, aerial and (other survey) activities and any


interpretation of data relaiing thereto as may be contained in Exploration


Work Programs and Budgets, and the drilling of such shot holes, core holes,


stratigraphic tests. Exploratory Wells for the discovery of Petroleum.


Appraisal wells and other related operations.


1.42 "Exploration Expenditures” means all Costs and Expenses for Exploration


Operations other than Drilling Costs whether directly or indirectly incurred


including but not limited to training, administration, service. Finance Costs


and related expenses and overhead and study costs.


I 43 "Exploratory Well" means any well dnllcd with the objective of confirming a


structure or geologic trap in which Petroleum capable of Commercial


Production in significant quantities has not been previously discovered.


1 44 "Field” means a Petroleum reservoir or group of reservoirs within a common


geological structure or feature. “Field” may be an "Oil Field" or a “Natural


Gas Field" as designated by Contractor.











8


 -Finance Costs" or "Interest Costs" shall include all amounts of interest, fees


and charges paid in respect of any debt incurred in carrying out the Petroleum


Operations and any refinancing of such debts, providing that in the case of


Affiliate debt, it shall include interest only to the extent that it docs not exceed


a rate which would have been agreed upon between independent panics in


similar circumstances and such interest is not limited by which assets or


services arc purchased by the loan principal.


1.46 "Force Majeurc" is defined as set forth in Article 24.2.


1.47 "Foreign Employee" is defined as set forth in Article 16.17





1.48 "Foreign Subcontractors" means Subcontractors which arc organised outside


of Northern Iraq Administration and under Current Legislation arc not obliged


1.49 to establish permanent representative offices in Northern Iraq Administration.


"Gas Sales Agreement" is any agreement to be entered into for the sale of


Non-associatcd Natural Gas and Associated Natural Gas in accordance with


1.50 the provisions of Article 152.


"Gcnel F-nerji A S " means the legal entity established in accordance with the


laws of the Republic of Turkey.


1.51 "Joint Operating Agreement" or "JOA" means the agreement to be concluded


if necessary between the Contractor and the third parties, which shall be


supplementary to and consistent with the provisions of this Agreement and


1.52 which shall regulate the terms under which Petroleum Operations will be


conducted.


"I.IBOR" means the three (3) months U S. Dollars London Interbank fixing


offer rale quoted daily in the London Financial Times.


1.53 "Marketing Team" is defined as set forth in Article I5.2.n.ii.


1.54 "Measurement Point" means the location specified in an approved


Development Plan where the Petroleum is metered and delivered to the Parties


or such other location as tl»e Parties may agree from time to time pnor to the


1.55 submission of a Development Plan as the circumstances muy require.


"Month" or "Calendar Month" means a calendar month.


1.56 "Natural Gas" means Non-associatcd Natural Gas and Associated Natural Gas


in their natural state.


1.57 "Natural Gas Field" means a field from which more than filly (50) percent of


the estimated reserves on an energy equivalency basis arc Natural Gas at


1.58 surface conditions.


"Non-nsaociatcd Natural Gas" means nil gaseous hydrocarbons produced from


gas wells, and includes wet gas. dry gas and residue gas remaining after the


extraction of liquid hydrocarbons from wet gas.











9


 1.59 “Northern Iraq Administration” or “Government" means the Northern Iraq


Administration. Council of Ministers and all political or other agencies or


instrumentality or subdivisions thereof including but not limited to any local


government or other representative, agency or authonty, which has the


authority to govern, legislate, regulate, levy and collect taxes or duties, grant


licences, permits, approve or otherwise impact (whether financially or


otherwise) directly or indirectly upon any of the Parties' rights, obligations or


activities under the Agreement; the word ‘'Governmental” shall be construed


accordingly.


1.60 "Oil Field” means a field from which more than fifty (50) percent of the


estimated reserves comprise Crude Oil.


I 61 "Operation Expenses" means those costs incurred in day-to-day Petroleum


Operations, whether directly or indirectly incurred including but not limited to


all costs, expenses and expenditures associated with the Production,


processing and transportation to the Measurement Point of Petroleum,


1.62 training, administration, sendee, payments for abandonment and site


restoration in accordance with Article 8.8, insurance costs in accordance with


Article 22.2. and related expenses.


“Operator" means the Contractor or a company to be established by the


Contractor upon the mutual agreement of the parties.


1.63 "Party" or “Parties" means I he parties whose authorized representatives have


affixed their signatures hereto-


1.64 "Payment Date" has the meaning as defined in 10.9





165 “Petroleum" means Crude Oil and Natural Gas-


1.66 “Petroleum Operations" means the Exploration Operations; the Development


Operations, Production Operations, and transportation to the Measurement


Point and other activities related thereto carried out pursuant to this


1.67 Agreement and the JO A.


“Petroleum Operations Account" shall have the meaning given to it in


paragraph 4.1 of section I of the Accounting Procedure.


1.63 “Production” or "Production Operations" mams operations and all related


activities carried out for Petroleum production after the approval of any


Development Plan, including without limitation extraction, injection,


stimulation, treatment, transportation, storage, lifting, and associated


1.69 operations, but does not include any storage or transportation beyond the


Measurement Point.


"Profit Natural Gas” is defined as set forth in Article 10.9.





1.70 “Profit Oil" is defined as set forth in Article 10.9.


1.71 “Profit Tax" is defined as set forth in Article 16


1.72 "Reserved Crude Oil" means Crude Oil produced and saved from die


Agreement Area as determined in Article 11.5.


1.73 "Study Area" means the part of the Agreement Area, which will be defined in


a Study Program.


1.74 "Study Program" means the progrum to he produced and carried out by the


Contractor in accordance with Article 8 following the conclusion that


Commercial Production is feasible.


1.75 "Subcontractor" means any natural person or juridical entity agreed directly or


indirectly by or on behalf of Contractor to supply goods, works or services


related to this Agreement,


1.76 "Third Party" or "Third Parties" means one or more of a natural person or


juridical entity other than a Party hereto and any Affiliate of a Party.


1.77 "Taxes'* means nil levies, duties, payments, fees, taxes or contributions


payable to or imposed by Governmental agencies, Governmental subdivisions


or republican, municipal or local authorities within the Government of


Northern Iraq Administration or within the government of Iraq.


1.78 "Transfer of Operation" means the day, the Petroleum Operations in the Field


arc transferred to the Contractor on the date the Contractor completes the


mobilisation of its office and personnel, within 45 (lofty five) days following


the Effective Date


1.79 “VAT" means Northern Iraq Administration value added tax


1.80 “Withholding Tax” is defined as set forth in Article 16.13.


1.81 "Work Program" and "Work Program and Budget" means any work program


and work program and Budget to be submitted to the Co-ordination


Committee by the Contractor in accordance with the provisions of Article 9


and which shall set out the proposed Petroleum Operations to be earned out in


the Agreement Area together with the associated Budget as the ease may be.


AKTILLh 2


SCOPE OF AOKIDOT AXU G£>XRAL PROVISION


2.1 The approval of this Agreement by the Govemorate should not be deemed as a


challenge of the territorial integrity of Iraq and Govemorate hereby ratifies the


Licence according to the Current Legislation


2.2 Subject to the terms and conditions of the Agreement, the Northern Iraq


Administration hereby in accordance with Current legislation grants to the


Contractor the exclusive rights to conduct Petroleum Operations in the


Agreement Area during the term of this Agreement.














II


2.3 Contractor shall be responsible to the Govemorate for the execution of such


Petroleum Operations in accordance with the provisions of the Agreement.


2.4 In performing Petroleum Operations, Contractor shall provide all financial and


technical requirements, unless otherwise provided in this Agreement and


conduct all operations in accordance with the standards generally accepted in


the international Petroleum industry.


2.5 Contractor shall be compensated for its services, not by way of reimbursement


in cash of its expenditures under the Agreement, but by receipt of its share ol


Petroleum from the Agreement Area to which it may become entitled by way


of cost recovery out of Cost Recovery Petroleum described in Article 10. If


Petroleum produced from Development Areas within the Agreement Area


developed by Contractor. Cost Recovery Petroleum under Article 10 and


Profit Oil and Profit Natural Gas is insufficient to reimburse Contractor for


Costs and Expenses incurred by Contractor, Contractor shall bear its own


losses in respect of any shortfall.


2.6 This Agreement defines the Parties' rights and obligations, governs their


mutual relations and establishes the rules and methods for the Exploration,


Development. Production, and sharing of Petroleum between them. The entire


interests, rights and obligations of each of the Parties under this Agreement


shall be solely governed by the provisions of this Agreement.


2.7 During the period in which this Agreement is in force, all Available Crude Oil


and Available Natural Gas resulting from Petroleum Operations, will be


shared between the Govemorate and the Contractor in accordance with the


provisions of Article 10 of this Agreement


2.8. It is agreed that the Operator shall be the Contractor unless changed by the


Contractor with another Operator. That appointment shall be effective from


the date it is notified to all concerned Parties. Following the appointment the


Operator shall act as the designated non-profit agent of the Contractor for the


conduct of Petroleum Operations in accordance with this Agreement and any


future JOA to be entered into.


ARIJ.CLEJ


AGREEMENT AREA


3.1 The Agreement Area is as set out by the geographic location and co-ordinates


described in Annex “A" attached hereto and delineated in the map. which


forms part thereof. The total area of the Agreement Area may hereafter be


reduced only in accordance with the provisions of this Agreement.


3.2 Except as for all rights and authorisations necessary for the implementation of


the provisions of this Agreement, no right is granted to the Contractor, any


other entity to the use or disposal of any other natural or man-made resources


or aquatic resources or other natural resources with the exception of aquatic








12


 resources used directly in Petroleum Operations in accordance with relevant


permits which will be obtained through the Northern Iraq Administration.





AH I IC I K. 4


AGREEMENT IEEM


4 I The term of the Agreement shall be deemed to have begun on the Transfer of


Operations Date and shall continue for a total of twenty-five (25) consecutive


Agreement Years, unless the Agreement is sooner terminated in accordance


with Article 28 of this Agreement


4.2 If in respect of any Development Area. Commercial Production remains


possible beyond the initial period of twenty-five (25) consecutive Agreement


Years specified in Article 4.1 the Contractor, after giving notice to the


Govemonte at least one (I) year prior to the end of any such period, and after


obtaining approval by the Co-ordination Committee of a revised Development


Plan shall be entitled to liuvc an extension of the term of this Agreement with


respect to such Development Area for an additional term of five (5) years or


the prcxlucing life of the Development Area, whichever is lesser, subject to the


approval of the Govemornte, and such approval shall not be unreasonably


withheld.


ARTICLES


RELINQUISHMENTS


5.1 Contractor may at any time relinquish voluntarily all or any part of the


Agreement Area without any further liability. The area designated under


Article 5.1 for relinquishment shall consist as far as practicable of rectangular


blocks bounded by lines running due north and south and due cast and west


and shall not be less than five (5) square kilometres. The area designated for


relinquishment need not consist of one contiguous area.


ARTICLE 6


COORDINATION COMMITTEE








6.1 For the purpose of providing the overall supervision and direction of and


ensuring the performance of the Petroleum Operations, Govemorate and


Contractor shall establish a Co-ordination Committee within forty-five (45)


days of the Effective Date.





6.2 The Co-ordination Committee shall comprise a maximum total of four (4)


members Hie Govemorate shall appoint a total of two (2) representatives and


Contractor shull appoint two (2) representatives to form the Co-ordination


Committee. All the aforesaid representatives shall have the right to attend and


present their views at meetings of the Co-ordination Committee. Each





*?li< «rl l:r>'i ft ulumtil


$h---«





13


 representative shall have the right to appoint an alternate who shall be entitled


to attend all meetings of the Co-onlination Committee but who shall have no


vote except in the absence of the representative for whom he is the alternate.





6.3 Ihe first Chairman of the Co-ordination Committee shall one of the


representatives designated by the Govemoralc (or his alternate), and the first


Vice Chairman shall be the chief representative designed by the Contractor,


(or his alternate). The Chairman and Vice Chairman shall be appointed for a


term of two (2) years. The Chairman of the Co-ordination Committee shall


preside over meetings of the Co-ordination Committee and in the absence of


the Chairman (or his alternate); the Vice-Chairman shall preside. Such Parties


may designate a reasonable number of advisors, who may attend, but shall not


be entitled to vote at. Co-ordination Committee meetings.


6.4 A regular meeting of the Co-ordination Committee shall be held at least twice


every year. The Secretary’ to be designated pursuant to Article 6.9 shall be


responsible for calling such regular meetings of the Co-ordination Committee


and shall do so at the request of the Chairman by sending a notice to the


Parties. Other meetings, if necessary, may be held at any time at the request of


the Parties or Contractor. In each case the secretary shall give the Parties at


least 30 days notice (or such shorter period as the Parties may' agree) of the


proposed meeting date, the time and location of the meeting.


6.5 The Parties hereby empower the Co-ordination Committee to:


a) review and examine any Work Program and Budget proposed by the


Contractor and any amendment thereof;


b) determine the Commcrciality of each proposed Development


Operation;


c) review and adopt proposed Dev elopment Operations and Budgets;


d) approve or confirm the following items of procurement and


expenditures:


i) approve procurement of any item within the Budget with a unit


price exceeding Two Hundred and Fifty Thousand U.S.S (U.S.S


250,000) or any single purchase order of total monetary value


exceeding One Million U S. S (U-S.S1.000.000);


ii) approve a lease of equipment, or an engineenng sub Agreement


or a service Agreement within the Budget worth more than Five


Hundred Thousand U.S. $ (US$500,000) in total; and


iii) approve excess expenditures pursuant to Article 9.5 hereof and


the expenditures pursuant to Article 9.6 hereof.


e) demarcate boundaries of a Development Area.








14


0 review and approve the insurance program proposed by the Contractor


and emergency procedures on safely and environmental protection, in


addition all programmes and budgets which arc in connection with


environmental protection;


g) review and approve personnel policies, selection and training programs





for Operator. Without prejudice to the foregoing, it is accepted that


part of the personnel policy of Operator shall be to give preference to


local citizens, provided that the conduct of Petroleum Operations shall


not be affected.





h) discuss, review, decide and approve other matters that have been


proposed by cither Party. Contractor or the Operator.


i) review and discuss the development work and technological regimes





proposed by the Parties; and


j) appoint sub-commiuees to meet from time to time to review any aspect


of Petroleum Operations, which the Co-ordination Committee thinks


fit.


6.6 Decisions of the Co-ordination Committee shall be made by unanimous





decision of the representatives present and entitled to vote. Each


representative will have one vote. All decisions made unanimously shall be


deemed as formal decisions and shall be conclusive and equally binding upon


the Parties.





6.7 Parties shall endeavour to reach agreement and unanimous decision on all


matters presented to the Co-ordination Committee In the event that on any


matter related to the investment or any matter related for the Contractor to


make or cause to make any cost or expense for the Petroleum Operations in


relation with the Annual Work Program and Budget; which the Co ordination


Committee arc unable to reach agreement and the Contractor is insisting that


its proposal shall prevail. If Govemorate Representative's view is that the


proposed action would result in serious permanent damage to that field or


reservoir or materially reduced recover)' of Petroleum over the life of the field


or reservoir then the matter will be referred to an internationally recognised


independent expert appointed by the Parties (and in case of failing to appoint


such expert within fifteen (15) days then as appointed by the United Kingdom


Petroleum Institution Chairman), whose decision on accepted international


Petroleum Industry practice shall be final and binding. The costs of the expert


shall be met by the Parties equally and shall be recoverable as Costs and


Expenses.





6.8 A matter, which requires urgent handling, may be decided by the Co¬


ordination Committee without convening a meeting, with the Co-ordination


Committee making decisions through telexes or the circulation of documents.





The Co-ordination Committee shall nominate a Secretary, to record minutes of


the meetings of the Co-ordination Committee, and may establish technical and


MhVtld Ef«o*l<‘uluw»«)


Sbrng Apeevnort


15


other advisory sub committees. The Secretary shall take a record of each


proposal voted on anil the results of such vote at each meeting of the Co¬


ordination Committee Each representative of the Parties shall sign and be


provided with a copy of such record at the end of such meeting. The Secretary


shall provide each Party with a copy of the minutes of each meeting of the Co¬


ordination Committee within fifteen (15) days after the end of such meeting.


Each Party shall thereafter have a period of fifteen (15) days to give notice of


any objections to the minutes to the Secretary. Failure to give notice within


the said fifteen (15) day period shall be deemed approval of those minutes. In


any event the record of proposals voted on to be provided at the end of each


meeting shall be conclusive and take precedence over the minutes.


6.10 All costs and expenses incurred with respect to the activities of the Co¬


ordination Committee shall be paid or reimbursed by the Contractor and


charged to Operation Expenses in accordance with the Accounting Procedure.


ARTICLE 7


OPERATOR RESPONSIBILITY








7.1 The Parties agree that the Operator shall act as the Operator for Petroleum


Operations within the Agreement Area in accordance with approval Work


Programs and Budgets unless otherwise stipulated in this Article 7.


7.2 The Operator shall have the following obligations:





a) to perform the Petroleum Operations reasonably, economically and


efficiently in accordance with directions received from the Co¬


ordination Committee. It is recognised that the Co-ordination


Committee through the Operator will have operating control of all


Petroleum Operations, including the right to authon.se the appointment


of the General Director and Deputy Director or the Directors;


b) to conduct (implement) the Work Programs and Budgets approved by





the Co-ordination Committee;


c) to be responsible for purchasing facilities, equipment and


miscellaneous material and enter into subcontracts and service


contracts at Contractor’s instruction with service providers and vendors


related to the Petroleum Operations, in accordance with approved


Work Programs and Budgets and instructions from Contractor.


d) to prepare and submit for approval a personnel training program and its





annual budget and carry out the same as approved by the Co-ordination


Committee;





to establish and maintain complete and accurate accounting records


regarding its costs and expenditures for the Petroleum Operations in


accordance with the Accounting Procedure and this Agreement;








16


0 to make necessary preparation for regular meetings of the Co¬


ordination Committee, and to submit to the Co-ordination Committee


information related to the matters reviewed and approved by the Co¬


ordination Committee;


g) to assist Contractor and Govemorate ns requested in the provision of


reports to the Co-ordination Committee on Petroleum Operations


conducted under this Agreement.


7.3 Operator and its shareholders shall not be responsible for any activities


(including Petroleum activities) affecting the Agreement Area prior to the


Effective Date.


7.4 The Operator shall provide both Parties with copies of all relevant data and


reports pertaining to Petroleum Operations (including but not be limited to


geophysical, geological, technological, operational, accounting or other


material) required by such Parties.


7.5 The Parties agree to use their best endeavours to agree and execute a Joint


Operating Agreement should the Parties consider it necessary after


appointment of an Operator other than the Contractor. Any Joint Operating


Agreement to he entered into shall be based on the Association of


International Petroleum Negotiators Model International Joint Operating


Agreement then current and shall be subject to, wholly consistent with and


shall not detract from the provisions of this Agreement


ARTICLE 8


PROCEDURE FOR DETERMINATION QF COMMERCIAUIY AXD


APPROVAL QF DEVELOPMENT PLAXS








8.1 If. at any time Contractor concludes that Commercial Production (or


significant additional Commercial Production if Commercial Production has


previously been established) from the Agreement Area is feasible, it shall


notify the Northern Iraq Administration within forty-five (45) days of reaching


such a conclusion.





8 2 Within forty-five (45) days of receipt of such notice. Contractor shall tn the


first instance present to the Co-ordination Committee for approval a proposed


Study Program which shall be deemed approved if no written objections are


raised by any member of the Coordination Committee w ithin thirty (30) days


following receipt thereof. The proposed Study Program shall specify in


reasonable detail the appraisal work including seismic, drilling of wells and


studies to be earned out and the estimated time frame within which the


Contractor shall commence and complete the program and also appropnate


budgets














17


8 3 Thereafter the Contractor shall carry out the Study Program approved by the


Co-ordination Committee Within ninety (90) days after completion of auch


Study Program, the Contractor shall submit to the Co-ordination Committee a


comprehensive evaluation report on the Study Program. Such evaluation


report shall include, but not be limited to: geological conditions, such ns


structural configuration; physical properties and extent of reservoir rocks;


pressure, volume and temperature analysis of the reservoir fluid; fluid


characteristics, including gravity of liquid hydrocarbons, sulphur percentage,


sediment and water percentage, and product yield pattern; Natural Gas


composition; production forecasts (per well and per Field); and estimates of


recoverable reserves


8.4 Together with the submission of the evaluation report, the Contractor shall


submit to the Co-ordination Committee a written declaration including one of


the following statements:


a) that the Commercial Production previously notified to the Northern


Iraq Administration pursuant to Article 8.1 is feasible;


b) that such Commercial Production is not feasible (contrary to the notice


containing Contractor's initial expectations); or


c) that Commercial Production will be conditional on the outcome of


further specified work that the Contractor commits to carry out under a


further Exploration or Study Program in specified areas within or


outside the rclcvunt Study Aren


8.3 In the event the Contractor makes a declaration under Article 8.4(c) above.


CocUraclor shall be entitled to retain the relevant Study Area pending the


completion of the further work committed under that Article, at w hich time the


Contractor shall advise the Co-ordination Committee of its conclusion aa to


whether or not there m in fact a new Commercial Discovery and the provisions


of Article 8.4(a) or (b) shall be applied accordingly


8 6 If the Contractor declares pursuant to Article 8.4(a) that Commercial


Production is feasible, the Contractor shall submit to the Co-ordination


Committee (a) a proposed Development Plan in respect of the relevant


Commercial Discovery (containing the mart era specified in Article 8.7 and


8 8) and (b) a proposed designation of the Development Area, both of which


shall be subject to the Co-ordination Committee's approval Such approval


will not be unreasonably withheld or delayed, provided that each shall be


deemed approved as submitted if no written objections are presented thereto


by any member of the Co-ordination Committee within forty-five (45) days of


receipt Upon approval being granted or deemed as provided under this


Article 8.6. the Contractor, with any requested assistance from the Operator,


shall proceed promptly and diligently to implement the Development Plan in


accordance with good international Petroleum industry practices, to install all


necessary facilities and to commence Commercial Production.














18


8.7 The Contractor's proposed Development Plan to be submitted pursuant to


Article 8.6 shall detail the Contractor’s proposals for Development and


operation of the Development Area It will detail any facilities and


infrastructure, which may be required up to the Measurement Point, either


inside or outside of the Development Area. Any Development Plan shall set


forth production parameters, number and spacing of wells, the facilities and


infrastructure (including proposed locations) to be installed for production,


storage, transportation and loading of Petroleum, an estimate of the overall


cost of the Dev elopment, and estimates of the time required to complete each


phase of the Development Plan, a production forecast and any other factor that


would affect the economic or technical feasibility of the proposed


Development.


8.8 Any Development Plan shall also include an abandonment and site restoration


program together with a funding procedure for such program Each


abandonment plan shall describe removal and abandonment measures deemed


necessary following completion of Production from the relevant Development


Area together with an estimate of the costs thereof. The abandonment plan


shall provide for the removal of facilities and equipment used in Petroleum


Operations or their in place abandonment, if appropriate, in the Development


Area and the return of used areas to a condition that reasonably permits the use


of such areas for purposes similar to those uses existing prior to the


commencement of Petroleum Operations hereunder. All expenditures


incurred in abandonment and site restoration shall be treated as Costs and


Expenses and recoverable from Cost Recovery Petroleum in accordance with


Article 10 and the Accounting Procedure. All funds collected pursuant to the


funding procedure shall be dedicated to site restoration and abandonment and


will be placed in a special interest bearing account by Contractor, which shall


be held in the joint names of the Govemorate and the Contractor or their


nominees. Contractor's responsibilities for environmental degradation, site


restoration and well abandonment obligations, and any other actual,


contingent, possible and potential activity associated with the environmental


condition of the Development Area shall be limited to the obligation to place


the funds agreed to be paid in accordance with the said funding procedure in


the approved account in accordance with generally accepted international


Petroleum industry practice. Deposits in approved accounts shall be made on


a quarterly basis in arrears commencing with the first Calendar Quarter in


which there is Available Petroleum. All such payments deposited by


Contractor shall be treated as Costs and Expenses and recoverable as


Operation Expenses from Cost Recovery Petroleum in accordance with Article


10 of this Agreement. No Taxes shall be imposed on any amounts paid into,


received or earned by or held in the special interest bearing account. Hie


Govemorate shall be solely responsible for the implementation of the


abandonment plan.


8.9 Any significant changes to an approved Development Plan or proposals


related to extension of a Field or for enhanced recovery projects shall be


submitted to the Co-ordination Committee.











[«(]< (( l«l*"**)


Sl*mt


19


8.10 Subject to the terms of this Agreement the Contractor shall carry out, at its


own expense and financial risk, all the necessary Petroleum Operations to


implement an approved Development Plan. However, if, the Contractor in its


sole discretion determines exploitation turns out not to be commercially


profitable, the Contractor shall not be obligated to continue Development or


Production and will in such circumstances submit a revised development plan


that is commercially profitable to the Co-ordination Committee or relinquish


the Development Area.


8.11 Where there is a perceived need recognised by the Parties to improve the


economic effectiveness of the Petroleum Operations by constructing and


operating certain common facilities with other organisations (including for


example roads, non-import/non-export pipelines, compression and pumping


stations and communication lines) the Parties shall use their best efforts to


reach agreement between themselves and other appropriate enterprises as to


the construction and operation of such facilities with all costs, tariffs ami


investments made by the Contractor to be recoverable as Operation Expenses


in accordance with Article 10 of the Agreement and Accounting Procedure.








ARTICLE 9


ASttLAL-WOKK PROGRAMS AJSD BUDGETS











9.1 Contractor shall be responsible for the procurement of installations, equipment


and supplies and entering into contracts for the purchase of goods and services


with Sub Contractors including Foreign Sub Contractors and others arising out


of Petroleum Operations, all in accordance with approved Work Programs and


Budgets. Operator shall assist the Contractor when requested in respect of the


matters set out in the previous sentence, and shall implement domestic


procurement operations as provided in Clause 7.2.(c) in accordance with


approved Work Programs and Budgets.


9.2 Contractor shall submit to the Co-ordination Committee a minimum Work


Program for the year 2002 and the corresponding Budget within thirty (30)


days follow ing the Effective Dale of the Agreement.





9.3 Before the 31st October of each Calendar Year, the Contractor shall prepare


and submit to the Co-ordination Committee for its review a proposed annual


Work Program and Budget for the next Calendar Year. If the Co-ordination


Committee agrees to modifications in an annual Work Program andor Budget,


the Contractor shall promptly make such modifications to the Work Program


andor Budget and resubmit the modified Work Program and Budget to the


Co-ordination Committee. The Co-ordination Committee shall approve each


Work Program and Budget within forty five (45) days after receipt of it. If the


Co-ordination Committee fails to notify’ the Contractor of its approval or


disapproval of the Work Program and Budget within said forty-five (45) days


after its receipt, the annual Work Program and Budget proposed by the


Contractor together with any modifications timely requested by the Co-


ML---.





|>n.liL

111, IV 01


20


ordination Committee, shall be deemed to have been approved by the Co¬


ordination Committee.


9.4 In connection with the review and approval of the annual Work Program and


Budget, the Contractor and Operator shall submit to the Co-ordination


Committee such supporting data as reasonably requested by the Co-ordination


Committee.


9.5 The Contractor may, in accordance with the following provisions, incur


expenditures in excess of the approved Budget or expenditures outside the


approved Budget in carrying out the approved Work Program, provided that


the objectives in the approved Wort: Program are not substantially changed:


a) In carrying out an approved Budget, the Contractor may. if necessary,


incur excess expenditures of no more than ten percent (10%) of the


approved Budget in any specified budgetary category. The Contractor


shall report quarterly the aggregate amount of all such excess


expenditures to the Co-ordination Committee for confirmation.


b) For the efficient und as required operative performance of Petroleum


Operations, the Contractor may. without approval, undertake certain


individual projects which arc not included in the Work Program and


Budget, for a maximum expenditure of One Hundred Thousand U.S.S


(U S SI00,000), but shall, within ten (10) days after such expenditures


arc incurred, report to the Co-ordinaiion Committee for confirmation


c) Excess expenditures under this Article 9 5 shall not exceed five percent


(5%) of the approved or modified foul annual Budget for the Calendar


Year. If the aforesaid excess is expected to be in excess of said five


percent (5%) of the total annual Budget, the Contractor shall present its


reasons therefor to the Co-ordination Committee and obtain its


approval poor to incurring such expenditures


9.6 In ease of emergency (as in where there is an immediate threat to life or


property), the Contractor may incur emergency expenditures for the amount


actually needed but shall report such expenditures to the Co-ordination


Committee as soon as they are made The said emergency expenditures shall


not be subject to Article 9.5 above.


9.7 Petroleum Operations will only be performed in accordance with the approved


or modified annual WoA Program and Budget, otherwise they will not be


deemed to be Costs and Expenses and will not be treated as Coat Recoverable.


























id, I ’loj


21


 lElILU. 10


AI.I.CK ATION





SliARlM;. AND KICHT fir RXPOH1





10.1 Contractor shall provide or procure the provision of all funds required lo


conduct Petroleum Operations under this Agreement, except as otherwise


provided in this Agreement, and Contractor shall be entitled to recover its


Costs and Expenses from Petroleum produced from the Agreement Area as


provided below.


1U-2 Contractor and/or Operator shall have the right to use free of charge Petroleum


excluding the Reserved Crude Oil produced from the Agreement Area to the


extent required for Petroleum Operations under the Agreement. The amount


of Petroleum which Contractor and/or Operator shall be entitled to use for


Petroleum Operations shall not exceed the amount, which would be expected


to be used in accordance with international Petroleum industry practice. For


the avoidance of doubt, the use of such Petroleum shall only be for the benefit


of Petroleum Operations and not the personal gain of any Party. An


appropriate paper shall also be executed for the use of such Petroleum.


10.3 Available Crude Oil and Available Natural Gas (hereinafter referred lo


collectively as "Available Petroleum") after reducing the Reserved Crude Oil


shall be measured at the applicable Measurement Point and allocated as set


forth hereinafter.


10.4. Contractor shall be entitled to recover all Costs and Expenses incurred in


respect of Petroleum Operations in a following manner





a) Operations Expenses will firstly be recovered from the Available


Petroleum;


b) Capital Expenditures will be recovered from remaining Available


Petroleum (hereinafter referred to as “Cost Recovery Crude Oil" and


“Cost Recovery Natural Gas" and collectively "Cost Recovery


Petroleum" as appropriate) following the recovery of Operations Costs


in the percentages as defined below:


(i) During the phase where Available Petroleum can not be


exported but only sold in the local market in the Northern Iraq


Administration, such phase as determined by the Co-ordination


Committee ninety percent (90%); and


(ii) During the phase where Available Petroleum can be exported





to other markets, such phase ns determined by the Co


ordination Committee, eighty percent (80%) on the exported


amount of the Available Petroleum will be allocated to the


Contractor as Cost Recovery Petroleum.








JuMT


22


Costs and Expenses shall be recovered in a manner consistent with the


Accounting Procedure and Article 10.5.


10.5 Costs and Expenses shall be recoverable from Cost Recovery Petroleum on a


first in, first out basis (i.c. Costs and Expenses will be recovered according to


the date they were incurred, curliest first). Recovery of Costs and Expenses


will commence as soon as Cost Recovery Petroleum is available.


10.6 To the extent that in a Calendar Year outstanding recoverable Costs and


Expenses related to the Agreement Area exceed the value of all Cost Recovery


Crude Oil or Cost Recovery Natural Gas from the Agreement Area for such


Calendar Year, the excess shall he carried forward for recovery' in the next


succeeding Calendar Years until fully recovered, but in no ease after


termination of the Agreement,


10.7 Recovery of Costs and Expenses shall be achieved by transferring to a Party at


the Measurement Point title to quantities of Cost Recovery Petroleum of


equivalent value (determined in accordance with Article II) to the Costs and


Expenses to be recovered in accordance with this Article 10.


10.8 To the extent that the value of Cost Recovery Petroleum received by the


Contractor from the Agreement Area during a Calendar Quarter is greater or


lesser than the Contractor was entitled to receive for that Calendar Quarter, an


appropriate adjustment shall be made in accordance with the Accounting


Procedure.


10.9 Following recovery of Costs and Expenses from Cost Recovery Petroleum in


accordance with the provisions of this Article 10, the remaining Petroleum


including any portion of Cost Recovery Petroleum not required for recovery of


Costs and Expenses (hereinafter referred to as “Profit Oil" or “Profit Natural


Gas" and collectively "Profit Petroleum”) shall be allocated between the


Parties in the following proportions, over each Calendar Year


The Profit Petroleum will be shared between:


Governorate's Share - fifty one percent (51%)


Contractor's Share - forty nine percent (49%)


10.10 Contractor shall prepare and provide the Govemoratc not less than ninety (90)


days prior to the beginning of each Calendar Quarter a written forecast setting


out the total quantity of Petroleum that Contractor estimates can be produced


and saved hereunder during each of the next four (4) Calendar Quarters in


accordance with Accepted international Petroleum industry practices and the


Work Program established in accordance with Article 9.


10.11 Crode Oil shall be measured at the Measurement Point for purposes of the


Agreement and delivered to the Govemoratc and Contractor and each such


Party as owners shall take in kind, assume risk of loss and separately dispose


of their respective entitlements of Cost Recovery Oil and Profit Oil. All Cost


Recovery Natural Gas and Profit Natural Gas shall be sold by the Contractor


in accordance with Article 15 of this Agreement. The Northern Iraq


Administration may agree that All Coat Recovery Oil and Profit Oil shall be


sold by the Contractor within the same principles as indicated in Article 15.


10.12. For the avoidance of any doubt, title to their relevant shares of Petroleum shall


pass Govemorale to the Parties as appropriate at the Measurement Point.


10.13 The Parties shall agree on procedures for taking volumes of Crude Oil


corresponding to their respective entitlements on a regular basis and in a


manner that is appropriate having regard to the respective destinations and


uses of the Crude Oil, all in accordance with the provisions of this Agreement.


If necessary the Parties will enter into a lifting agreement setting out the


agreed procedures for taking volumes of Crude Oil, and such agreement shall


comply with the principles of accepted international Petroleum industry


practice.


10.14 The Govemorate shall have the right to receive the Reserved Crude Oil in kind


at the well head and freely dispose the same. All costs incurred by the


Govemorate starting from the well head will be borne by the Govemorate.








ARTICLE 11














11.1 Parties agree that the value of Cost Recovery Petroleum should reflect the


actual price received by the Contractor for the said Petroleum. Given that the


Contractor can demonstrate that Petroleum is being sold to an independent


third party on an arms length basis, then the Cost Recovery Crude Oil shall be


valued as the actual revenues received by the Contractor for sales of Crude Oil


at the Measurement Point (adjusted if necessary for transportation, storage and


processing costs). If however such an independent third party sale cannot be


demonstrated, or at the discretion of the Contractor, then the Parties agree that


the value of the Cost Recovery Crude Oil. if sold on International Markets,


shall be adjusted to the international market price for Crude Oil from time to


time. In this case, for the purpose of determining the value of the Cost


Recovery Petroleum taken and disposed of by the Parties and/or their


assignees under this Agreement during each Calendar Quarter, The Parties


shall, pnor to the date of Commercial Production, agree upon the basket of


Crude Oil freely traded in international markets and referred to in


subparagraph a) below and the value of the Cost Recovery Petroleum shall be


adjusted to reflect the weighted average of daily f.o.b. prices for Agreement


term of sales from Petroleum producing countries in international markets for


the same Calendar Quarter of such basket of crude oil it being understood that


the follow ing principles will apply:


a) The weighted average of the basket shall be such that the average


gravity of the basket and the average gravity of the Crude Oil produced


under this Agreement arc equal; and











24


b) The pnees for individual referenced crude oil markers used within the


basket shall be based upon the numerical average of a daily report of


the actual price for each referenced crude oil marker as published in


agreed internationally recognised publications; and


c) Adjustment provisions will be incorporated into the basket formula to


take account of transportation costs involved in Crude Oil produced


under this Agreement arriving at a designated sales point (where the


sales point is not the Measurement Point) and to take account of


gravity \ anation beyond a pre-agreed range; and


d) Unless agreed otherwise, the last calculated weighted average basket


pnee shall sene as the provisional pnee for a Calendar Quarter until a


new pnee is determined.


11-2.In the event that the Parties arc unable to agree upon the basket of Crude Oil


envisaged in Article 11.1 above, or the principles relating thereto, then either of


the Parties may refer the question for a final, non-rcvisablc determination by an


independent expert designated by the UK Institute of Petroleum. Pending such


determination, the price shall be as determined in Article 11.1(d) above.


11.3. Natural Gas shall be valued at the actual revenues received less transportation,


storage, treatment, processing, marketing, distribution, liquefaction and all other


associated costs incurred by Contractor beyond the Measurement Point in


supplying Natural Gas to customers beyond the Measurement Point.


11 4.The provision in Article 11.1, 11.2 and 11.3 will also be applicable in ease the


Govemorate decides that the Contractor will sell its Profit Oil or Profit Natural


Gas for the actual payment to be paid by the Contractor.


11.5. The daily average of the Cmde Oil produced between January I. 2002 and the


Signing Date will he the base line for the determination of the daily production.


The Reserved Crude Oil will be calculated by reducing 15% (fifteen percent)


from such average daily production, for the operation and lifting costs of the


Reserved Crude Oil








ARTICLE 12


ANCILLARY RICH IS OK THE CONTRACTOR AND OPLKAIOK








12.1 In addition to the rights to carry out Petroleum Operations within the


Agreement Area the Govemorate shall provide or otherwise procure access to


Contractor to all existing facilities and infrastructure in the Agreement Area


owned by the Northern Iraq Administration for the purpose of carrying out its


Petroleum Operations during the term of the Agreement Such access shall be


on terms as regards access and lands no less favourable than those offered to


other persons or entities, in addition, in any case within the Petroleum Law.


The Contractor will reimburse the value determined, for the supporting


facilities utilized by the operation personnel (excluding Petroleum Production


facilities), decided to be used by the Contractor. Such determination will be


made within two (2) months following the Transfer of the Operations, by the


Co-ordination Committee and the reimbursement to be made within one (I)


year in equal instalments..


12.2. Provided that, the Govcmorate arc submitted information below, the


Contractor shall have the right to use. produce, reprocess and export all


existing geoscience, engineering, environmental and geodetic data (including


magnetic tapes and films) maps, surveys, report*, and studies it deems


necessary to carry out Petroleum Operations hereunder including, but not


limited to magnetic surveys, seismic survey*, well logs and analysis, core


analysis, well Hie*, geologic and geophysical map* and reports, reservoir


studies, reserve calculations, accurate geodetic co-ordinates for the locution of


all wells and seismic lines and all other pertinent data relative to the


Agreement Aren, which are owned by the Govcmorate. In the event that any


information iN to be sold on confidential basis to any third party by the Parties


(consent on which is required from the Parties) profit shall be distributed in


accordance with the shore of Profit Oil under the Article 10.


12 3 The Contractor shall have the right to conduct all geoscience, engineering,


environmental and geodetic studies it deems necessary to curry out Petroleum


Operations under the Work Program. Said studies may include, but are not


limited to: seismic surveys, magnetic surveys, global positioning surveys,


acral photography (obtaining relevant permits), collection of


soi l/wutcr/o 11/rock samples for scientific and environmental studies


Contractor shall be granted access to and/or permission to fly subject to


obtaining appropriate consents (which will not be unreasonably withheld or


delayed) over the Agreement Area to conduct said studies Contractor shall


have the nght to import equipment and supplies necessary to conduct said


studies as well as the nght to export data, film and samples to laboratories


outside the Northern Iraq Administration to conduct such studies.


12.4 Subject to (i) prior approval by the Co-ordination Committee, and (ii) prior


consent and/or permit with any necessary local administration or government


or Govcmorate body and relevant landowners, the Contractor and/or Operator


shall have the right to clear the land, to dig. pierce, drill, construct, erect,


locate, supply, operate, manage and maintain pits, tanks, wells, trenches,


excavations, dams, canals, water pipes, factories, reservoirs, basins, man lime


storage facilities and such, primary distillation units, separating units for first


oil extraction, sulphur factories aid other Petroleum producing installation*, as


well as pipelines, pumping stations, generator units, power plants, high voltage


lines, telephone, telegraph, radio and other means of communication


(including satellite communication systems), plants, warehouses, offices,


shelters, personnel housing, hospitals, schools, premises, underwit a pier* and


transportation, garages, hangers, workshops, maintenance and repair shops and


all the auxiliary services which are necessary or useful to Petroleum


Operations or related to them and. more generally, everything that is or could


become necessary or accessory to cany out the Petroleum Operations but for


ny doubt in accordance with the Current Legislation








26


12.5 The agents, employees and personnel of both Contractor and Operator, or


Subcontractors may enter or leave the Agreement Area and have free access,


within the scope of their functions, to all installations put in place by the


Contractor or Operator or otherwise utilised in Petroleum Operations.


12.6 Subject to prior consent of any appropriate local governmental bodies and the


relevant landowners the Contractor shall have the right to utilise the upper


soil, mature timber, clay, sand, lime, gypsum and stones other than precious


stones, and any other similar substances, necessary for the performance of


Petroleum Operations only in accordance with the Current Legislation. The


Contractor may utilise the water necessary for Petroleum Operations, on


condition that reasonable efforts arc taken to minimise potentially adverse


effects on irrigation and navigation, und that land, houses and the watering


places are not adversely affected.


12.7 The Contractor shall have the right to use existing pipeline and terminal


facilities belonging to or under the control of the Northern Iraq


Administration. The Govemorate shall assist in making these facilities


available to the Contractor on terms with regard to access and tariffs that arc


no less favourable than those make available to others.


ARTICLE 13


ASSISTANCE PROVIDED BY T11E GOVERN ORATE


13.1 To enable the Contractor to properly cany out the Petroleum Operations, the


Govemorate shall have the obligation to assist the Contractor upon request to:


a) provide the approvals or permits needed to conduct Petroleum


Operations and to carry out associated business activities and to open


local and foreign bank accounts (for both local and foreign currency)


in Northern Iraq Administration;


b) arrange for Foreign Exchange to be converted in accordance with the


principles set out in Article 18.9 of this Agreement;


c) use office space, office supplies, transportation and communication


facilities and make arrangements for accommodations as required;


d) assist with any custom formalities;


e) provide entry and exit visas and work permits for employees and their


family members of Operator. Contractor, their Affiliated companies


and Foreign Subcontractors, who are not citizens of Northern Iraq


Administration and who come to Northern Iraq Administration to


implement the Agreement and to provide assistance for their


transportation, travel and medical facilities whilst in Northern Iraq


Administration;








27


 0 provide necessary permits to send abroad documents, data and samples


for analysis or processing during the Petroleum Operations.


g) contact and instruct appropriate departments and ministries of the





Northern Iraq Administration and any other bodies controlled by the


Northern Iraq Administration to do all things necessary to expedite


Petroleum Operations;





h) provide permits, approvals, and land usage rights requested by


Contractor and/or Operator for the construction of bases, facilities and


installations for use in conducting Petroleum Operations; and


i) provide to the Contractor data and samples if such data and samples


exist concerning the Agreement Area other than those produced as a


result of Petroleum Operations.





ARTICLE 14


MEASUREMENT. Ol PLIBQLEL'M








14 1 All Petroleum produced, saved and not used in the Petroleum Operations in


accordance with Article 10.2 shall be measured at the Measurement Point


approved in the Development Plan.


14.2. The Measurement Point shall be the very final facility among all facilities the


cost of, which is included as a Cost, and Expense recoverable from Cost


Recovery Petroleum under the Agreement.


14.3. All Petroleum shall be measured in accordance with standards generally


acceptable in the international Petroleum industry. All measurement


equipment shall be installed, maintained and operated by the Operator. The


installed measurement equipment will have certificates of standards of


international organisation. The Parties shall be entitled periodically to inspect


the measuring equipment installed and all charts and other measurement or


test data at all reasonable ttmos. The accuracy of measuring equipment shall


be verified by tests at regular intervals and upon request by cither party, the


Parties, using means and methods generally accepted in the international


Petroleum industry.


14.4 Should a meter malfunction occur, Operator shall immediately have the meter


repaired, adjusted and corrected and following such repairs, adjustment or


correction shall have it tested or calibrated to establish its accuracy. Upon the


discovery of metering error. Operator shall have the meter tested immediately


and shall take the necessary steps to correct any error that may bo discovered


and after each ease approval of the Govemorate on using the meter is


necessary.


14.5 In the event a measuring error is discovered, the Parties shall use all


reasonable efforts to determine the correct production figures for the period


during which there was a measuring error and correct previously used


readings. Contractor shall submit to the Co-ordination Committee a report on


the corrections earned ouL In determining the correction. Contractor shall


use. where required, the information from other measurements made inside or


outside the Development Area. If it proves impossible to determine when the


measunng error first occurred, the commencement of the error shall be


deemed to be the point in time halfway between the date of the previous test


and the date on which the existence of the measuring error was first


discovered.


14.6 All measurements for all purposes in this Agreement shall be adjusted to


standard conditions of pressure at sea level and temperature at sixty degrees


Fahrenheit (60°F).





ARXICLE.15


NATL’KAL GAS








15.1 Associated Natural Gas


a) Associated Natural Gas produced within the Agreement Area shall he


used primarily for purposes related to the Production Operations and


production enhancement including, without limitation, oil treating, gas


injection, gas lifting and power generation.


b) Based on the principle of full utilisation of the Associated Natural Gas


and with no impediment to normal production of the Crude Oil. any


Development Plan shall include a plan of utilisation of Associated


Natural Gas. If there is any excess Associated Natural Gas remaining


in any Oil Field after utilisation pursuant to Article 15.1.a) above


(hereafter referred to as “Excess Associated Natural Gas"), the


Contractor shall cany out a feasibility study regarding the commercial


utilisation of such Excess Associated Natural Gas.


i) If the Parties agree that Excess Associated Natural Gas has no


commercial value, then Operator shall act under the plan


approved by Co-ordination Committee, so that not to interfere


with normal oil production. Besides, in order to avoid any


doubt, both the plan and the Operator's activities under the plan


shall exclude pollution and correspond to relevant standards


effective in Current Legislation





ii) If the Parties agree that Excess Associated Natural Gas has


commercial value, they will endeavour to enter into gas sales


agreement! s) and/or other commercial and/or technical


arrangements with Third Parties required to develop such


Natural Gas. Investments in the facilities necessary for


production, transportation and delivery of Excess Associated


Natural Gas shall be made by the Contractor. The construction


of facilities for such Production and utilisation of the Excess


Associated Natural Gas shall be earned out at the same time as


the Development Operations, or at any time as may be agreed


to by the Parties.


iii) If either Party considers that Excess Associated Natural Gas


has commercial value while the other considers that Excess


Associated Natural Gas has no commercial value, the one who


considers Excess Associated Natural Gas to have commercial


value may utilise such Excess Associated Natural Gas. at its


own cos! and expense and without impeding the Production of


Crude Oil and without affecting the shares of Crude Oil and


Natural Gas otherwise to be allocated under the other


provisions of this Agreement, but if such Excess Associated


Natural Gas is not so utilised at any time or from time to time,


then such Excess Associated Natural Gas shall be disposed of


by the Operator in accordance with Article 15.1b) i)


c) The price of Associated Natural Gas produced from the Agreement


Area shall be determined by the Parties based on general pricing


principles taking into consideration such factors as sales pnees of


internationally transported gas delivered in Western Europe, quality


and quantity of the Associated Natural Gas (including the equivalent


substitute energy value) and the economics of Development. Unless


otherwise agreed, the Parties shall participate in ail gas sales


agreements entered into for the sale of Associated Natural Gas


produced from the Agreement Area in proportion to their Article 10


allocation rights. Gas sales prices shall be denominated in U.S.S.


d) Investments made in conjunction with the utilisation of both


Associated Natural Gas and Excess Associated Natural Gas, together


with investments incurred after approval of a Development Plan in


carrying out feasibility studies on the utilisation of Excess Associated


Natural Gas. shall be charged to Operation Expenses.


15.2 Non-associated Natural Gas


When any Non-associated Natural Gas is discovered within the Agreement


Area, the Parties shall implement a new agreement regarding the Appraisal


and possible development and marketing of the Non-associated Natural Gas in


the domestic and international markets. If the Parties cannot reach a new


agreement w ithin six (6) months or any period mutually agreed upon; the


Govemorate will own and will or cause to appraise, develop or produce such


Non-associated Natural Gas. Govemorate will take all necessary’ measures to


avoid any effect, which may hamper the Petroleum Operations of the


Contractor while producing Crude Oil.











IMlAlK.Tn.1


30


 ARTICLE 16


TAX/FISCAI, REGIME





16.1 This Article shall apply to each Contractor Party individually.


16.2 Subject to Current Legislation each Contractor Party. Foreign Employee and


Operator shall be entitled to full and complete exemption from all Taxes prior


to or after the Effective Date of this Agreement except as otherwise provided


for in this Agreement.


16.3 It is acknowledged that Double lax Treaties will have effect to give relief


from Taxes to, but not limited to. Contractor. Contractor Parties, Foreign


Subcontractors and Foreign Employees in accordance with the provisions of


such Double Tax Treaties, but not otherwise.


16.4 The Govemoratc, its successors or assignees will assume, pay and discharge,


in the name and on behalf of each Contractor Party, that Contractor Party’s All


Tax liabilities during the term of the Agreement in case the Contractors’ Tax


Exemption is not covering any taxes. The Govemoratc will assume all Taxes


to be levied on the calculation of the local sales of the crude oil and/or


petroleum products price at the entrance of the local refinery or follow ing the


refining process.


16.5 The obligation to assume, pay and discharge each Contractor Party’s payment


set out above by Govemoratc in accordance with the provisions of Article 16.4


shall fulfil the entire tax liability of each Contractor Party, except for the VAT


on local sales and taxes established on salaries of hired physical persons by


law, taking into account that no social taxes apply to foreign physical persons


by law.


16.6. Each Contractor Party shall maintain its tax books and records both in local


currency and in U.S.S.


16.7 The Profit Tax return for each Contractor Party shall be prepared and


submitted as follows:


i. Each Contractor Party shall prepare a Profit Tax return in local


currency and in U.S.$ for each Calendar Year and submit it lo


Govemoratc by 15 April following the Calendar Year, so that


Govemoratc can submit a Contractor Party’s Profit Tax return to the


relevant Tax authority within terms established by the Law.


ii. The Profit Tax return shall be prepared based on Contractor books and


accounts of Petroleum Operations as described in Article 17 of this


Agreement which Contractor is required to maintain in local currency


 and in U.S.S in accordance with the Accounting Procedure attached


hereto as Annex B





16 8 Governorate shall furnish to each Contractor Party the proper official receipts


that evidence official payment that Contractor Party’s Tax liability for a


Calendar Year by 30 April following the Calendar Year.


16 9. Governorate shall not credit, directly or indirectly. Contractor Parties’ Tax


payments against any other payments required to be paid to the Government or


the treasury


16 10 Governorate shall assume, pay and discharge any penalties, interest, fines or


similar levies for late payment of a Contractor Party’s Tax liabilities in respect


of any Calendar Year


16 11 Employees of the Contractor. Contractor Parties, their Affiliates and





Subcontractors, and those employees assigned by Contractor to Operator who


are not citizens of Northern Iraq Administration or Iraq (“Foreign


Employees") shall be not liable to Northern Iraq Administration personal


income tax imposed by the Northern Iraq Administration in accordance with


the Tax Code. Such Taxes if applicable will be paid by the Governorate on


behalf of the Foreign Employees A Foreign Employee will continue to be


subject to the provisions of any applicable Double Tax Treaty.





16.12 Foreign Employees who perform work in Northern Iraq Administration and


their employers that would otherwise be covered by and subject to social


insurance, pension fund contributions and similar payments under the social


security system of Northern Iraq Administration will be exempt from those


payments.





16 13 The only Taxes, duties, fees or other charges to be levied by the Northern Iraq


Administration or by any other Governmental entity on a Foreign


Subcontractor in connection with Petroleum Operations pursuant to this


Agreement shall be a tax to be withheld by any person or other legal entity


making revenue payments to a Foreign Subcontractor in the currency in which


the payment is made (the “Withholding Tax”)


16 14 VAT shall be imposed as follows





a) Goods, works and services supplied directly or indirectly to or by a


Contractor Party or its Affiliates. Operator or a Foreign Subcontractor


for the purpose of Petroleum Operations shall be exempt from VAT.


b) Import and re-export of goods for personal use by Foreign Employees


and family members will not be subject to VAT according to Current


Legislation




















It-


 c) Exports of Petroleum by ouch Contractor Party or its agents shall be


exempt from VAT with credit (zero per cent rate),


d) All re-exports by a Contractor Party or its Affiliates, Subcontractors or





their agents of goods, works and services supplied for the purposes of


Petroleum Operations including but not limited to re-export of goods


temporarily imported into Northern Iraq Administration for the


purposes of Petroleum Operations shall be exempt from VA T with


credit (zero per cent rate).


AKTK.LK-L7





AC-LOL'IYl-LNLu HNANUAI. KEP0R£13ti AM) ALHJJ.1





17.1 Contractor shall maintain books and accounts of Petroleum Operations in


accordance with the Accounting Procedure attached hereto as Annex U. These


shall be maintained in loeul currency of Northern Iraq Administration and in


U.S.S in accordance with generally accepted international Petroleum industry


accounting principles. All books and accounts, which are made available to


the authorities in accordance with the provisions of the Accounting Procedure,


shall be prepared in English lunguugcs.


17.2. The Accounting Procedure specifics the procedure to be used to verify and


establish promptly and finally Contractor's Costs and Expenses under Article


10 of this Agreement.


17.3 Sales revenues, expenditures, financial results, tax liabilities, and loss carry¬


forwards of each Contractor Party shall be determined in accordance w ith the


rules, rights, and obligations set forth in this Agreement in so far as such sales


revenues, expenditures, financial results, tax liabilities, and loss carry¬


forwards arc related to Petroleum Operations under this Agreement.


17.4. On annua! basis Contractor shall submit to the Governmental agency an


internationally recognised audit's report on Costs and Expenses incurred, that


under Article 10 should be compensated by Cost Recovery Petroleum, the


report shall also include profit calculation pursuant to provisions of Article 16


of this Agreement. Govemoraic shall have the right to audit the books and


accounts maintained by Contractor.


ARTICLE 18


CCRREXCV, PAYMENTS AND EXCHANGE CONTROL


18.1 Contractor and each Contractor Party, and their Affiliates, Subcontractors and


Operator shall have the right to open, maintain, and operate Foreign Exchange


bank accounts both in and outside of Northern Iraq Administration and local


currency bank accounts inside Northern Iraq Administration. Such operations


performed in Northern Iraq Administration will comply with Current


Legislation.








33


18.2 Contractor and each Contractor Purty, and their Affiliates shall have the right


to transfer all funds received in and converted to Foreign Exchange in


Northern Iraq Administration without payment of Taxes, fees, duties or


imposts to bank accounts outside Northern Iraq Administration in accordance


with the Current Legislation.


18.3 Contractor and each Contractor Party, and their Affiliates and Foreign


Subcontractors shall have the right to hold, receive and retain outside Northern


Iraq Administration and freely use all funds received and derived from


Petroleum Operations by them outside Northern Iraq Administration without


any obligation to repatriate or return the funds to Northern Iraq


Administration, including but not limited to all payments received from export


sales of Contractor Parties’ share of Petroleum and any sales proceeds from an


assignment of their interest in this Agreement


18.4 Contractor and each Contractor Party, and their Affiliates, Foreign


Subcontractors and Operator have the right to import into Northern Iraq


Administration funds required for Petroleum Operations under this Agreement


in Foreign Exchange.


18.5 Contractor and each Contractor Party, and their Affiliates and Foreign


Subcontractors shall have the right to pay outside of Northern Iraq


Administration for goods, works and services of whatevor nature in


connection with the conduct of Petroleum Operations under this Agreement


without having first to transfer to Northern Iraq Administration the funds for


such payments.


18.6 Whenever such a need arises Contractor and each Contractor Party and their


Affiliates, Foreign Subcontractors and Operator shall be entitled to purchase


local currency with Foreign Exchange and covert local currency into Foreign


Exchange in accordance with provisions stipulated in legislation.


18.7 Contractor and each Contractor Party, and their Affiliates and Foreign


Subcontractors shall have the right to pay outside Northern Iraq


Administration principal and interest on loans used for funding Petroleum


Operations without having to first transfer to Northern Iraq Administration the


funds for such payment.


18.8. Contractor and each Contractor Party and their Affiliates, and Operator shall


have the right to pay, wages, salaries, allowances and benefits of their foreign


personnel working in Northern Iraq Administration in Foreign Exchange


partly or wholly outside of Northern Iraq Administration.


18 9 Conversions of currency shall be recorded at the rate actually experienced in


that conversion. Expenditures and sales revenues in currency other than the


U.S.S shall be translated to U.S $ at the rates officially published by [ National


Bank of the Northern Iraq Administration ] at the close of business on the first


business day of the current month.











34


 ARTICLE IP


IMPORT AND F-XPORT








19 I Contractor, each Contractor Party and Affiliates and their agents and Operator


shall have the right to import into, export and re-export from Northern Iraq


Administration in accordance with the Current Legislation in force on the date


this Agreement is signed.


19 2 Contractor, each Contractor Party and Affiliates and their agents shall have the


right to sell any materials or equipment or goods which were used in


Petroleum Operations provided that such items are no longer needed for


Petroleum Operations and the coats of such items have not been and are not


intended to be included as Costs and Expenses recoverable front Coat


Recovery Petroleum


19 3 Contractor, each Contractor Party, their customers and their earners shall have


the right to export the share of Petroleum on behalf of Contractor or each


Contractor Party in accordance with Current legislation in force on the date


this Agreement is signed


19.4 Foreign Employees and family members of Contractor and its Affiliates, its


agents and Foreign Subcontractors, shall have the nght to import into and re¬


export from Northern Iraq Administration household goods and personal


property at any time in accordance with the Cuncnt Legislation.


ARTICLE-^


LXTUK1 QF H V fmOCARRONS' TRANSFER dt


and regulationsvqr disposal


20.1 The Contractor, Contractor Parties, any purchaser from such parties and their


respective carriers shall, for the duration of this Agreement, have the right to


export from any export point selected by the Contractor for such purpose, the


share of Petroleum to which the Contractor is entitled under this Agreement


provided that access to such export point is not restricted generally on the


grounds of safety or national security and or Current legislation. Access to


export points shall be given to the abo\e parties on a non discriminatory basis


and at rates no less favourable than those available in the country, or granted


to others by the Northern Iraq Administration


20.2. The transfer of title to each Contractor Party and Governorate of its share of


Petroleum shall be effective upon the lifting of that share by such Party at the


Measurement Point or. at the Parties' option, at some other point, proved by


 from the Measurement Point or at such other point us may be designated in


accordance with Article 20.2.





20.4 If one of the Parties is unable to lift its share of Petroleum in due time, with


the result that Petroleum Operations may be interfered with or in any way


disrupted, then after giving such notice as is practical in the circumstances any


other Party may dispose of it. and subsequently give back to such Party an


equivalent amount of Petroleum (taking into account any costs incurred).


ARTICLE 21


OWNERSHIP W AhhElh








21.1 Ownership of any asset, whether fixed or mo\cable, acquired by or on behalf


of Contractor in connection with Petroleum Operations hereunder shall vest in


the Northern Iraq Administration without consideration if (I) both the costs of


such asset have been recovered by Contractor under this Agreement, and (2)


either the Agreement has come to an end or. if earlier, when the asset is no


longer required for Petroleum Operations by the Contractor. The Contractor


shall enjoy continued free, exclusive and unrestricted use of all assets at no


cost or Iom of benefit to the Contractor until the termination of this Agreement


or if earlier until they are no longer required for Petroleum Operations. The


Contractor shall bear the custody and maintenance of such asacU and all risks


of accidental loss or damage thereto while they are required for Petroleum


Operations, provided however that all costs necessary to operate, maintain and


repair such assets and to replace or repair any damage or loss shall be


recoverable as Operation Expenses from Cost Recovery Petroleum in


accordance with the provisions of Article 10.


21.2 Whenever Contractor relinquishes any part of the Agreement Area, all


moveable property located within the portion of the Agreement Area so


relinquished may be removed to any part of the Agreement Area that has been


retained for use in Petroleum Operations.


21.3 The provisions of Article 21.1 and 21.2 shall not apply to mutcrials or other


property that arc rented or leased to Contractor, its Affiliates or Operator or


which belong to employees of Contractor, its Affiliates or Operator.





ARTICLE 22


^SAfEIY AND LIABILITY











22.1 Contractor shall obtain and maintain such types and amounts of insurance for


the Petroleum Operations as are reasonable ami such that they comply with the


Current Legislation and accepted international Petroleum industry practice and


standards.


22.2 The insurance, which may be obtained, may cover:











36


 a) destruction and damage to any property held for use during Petroleum


Operations and classified as fixed capital and/or leased or rented


property and/or interests in pipelines operated by the Contractor,


h) destruction of Crude Oil in storage;





c) liability to third Parties.


d) liability for pollution and expenses for cleaning up in the course of





Petroleum Operations,


e) expenses for wild well control;


o liability incurred by the Contractor in hiring land drilling rigs, vessels





and aircraft serving the Petroleum Operations; and


g) losses and expenses incurred during the transportation and storage in


transit of goods shipped from areas outside the Agreement Area


22.3 In any insurance agreements, the amount for which the Contractor itself is





liable (the “deductible amount") shall be reasonably determined between the


Contractor and the insurer and such deductible amount shall in the event of


any insurance claim be considered as Costs and Expenses of Petroleum


Operations recoverable from Cost Recovery Petroleum.


22.4 It is understood that, in order to meet their insurance obligations, insurance





providers used by Contractor may conclude reinsurance and co-insurancc


agreements with any other insurance enterprises and organisations.


22.5. Notwithstanding the other provisions of this Agreement, the Contractor shall


indemnify and hold harmless the Northern Iraq Administration against all


losses, damages and liability arising under any claim, demand, action or


proceeding brought or instituted against the Northern Iraq Administration by


any employee of the Contractor or any Subcontractor or dependent thereof, for


personal injuries, industrial illness, death or damage to personal property


sustained in connection with, related to or arising out of the performance or


non-performance of this Agreement regardless of the fault or negligence in


whole or in part of any entity or individual; provided, however, that such


losses, damages and liabilities are not caused by or do not ante out of the


performance or non-performarce of this Agreement by the Northern Iraq


Administration or Govemoratc and the Northern Iraq Administration or


Govemoratc shall indemnify and hold the Contractor (including for this


purpose any Affiliate, the Operating Company and all Subcontractors)


harmless against all such damage, losses and liabilities.





22 6. The Contractor (including for this purpose any Affiliate, the Operating


Company and all Subcontractors) shall indemnify the Northern Iraq


Administration for all loss or damage suffered by the Northern Iraq


Administration arising out of the Contractor’s Petroleum Operations if such








37


Petroleum Operations were not in accordance with Good Oilfield Practices 01


applicable laws, rules and regulations and, notwithstanding the foregoing, fot


any loss or damage to the environment or any cultural or national monument


arising out of conduct of the Petroleum Operations; provided, however, that


the Contractor (including for this purpose any Affiliate, the Operating


Company and all Subcontractors) shall have no liability hereunder if and to the


extent any loss and damage is caused by or arises out of any breach of this


Agreement (and any other agreements that may be entered into by and


between the Contractor, the Northern Iraq Administration in respect of the


Petroleum Operations) or breach of duty by the Northern Iraq Administration.


Notwithstanding the foregoing, the Contractor (including for this purpose any


Affiliate, the Operating Company and all Subcontractors) shall not be liable to


the Northern Iraq Administration for any punitive or exemplary damages or


any other indirect or consequential damages.


22.7. The Contractor shall not be responsible to the Northern Iraq Administration


for, and shall bear no cost, expense or liability of the Northern Iraq


Administration for. any claim, damage or loss to the extent such claim,


damage or loss docs not arise out of a failure to conduct Petroleum Operations


as provided in Article 22.6. In amplification of the foregoing, the Contractor


shall not be responsible for any environmental condition or damage existing in


the Agreement Area prior to the commencement of Petroleum Operations or


caused by a Force Majeure event during the term of this Agreement. Existing


environmental conditions will be evidenced by an independent Third Party


environmental baseline study of existing environmental conditions to be


commissioned by the Contractor, at its own cost and expense (which shall be


included as Costs and Expenses for tbe purposes of determining Cost


Recovery Petroleum, subject to prior approval by the Co-ordination


Committee) and shall be completed prior to the commencement of the relevant


Petroleum Operations in accordance with Good Oilfield Practices and Cun cm


Legislation related to the environmental issues. Such baseline study shall be


submitted to the Govemoralc and shall be incorporated in the Environmental


Impact Assessment to be prepared by the Contractor in accordance with the


environmental laws for die purpose of obtaining a permit for Petroleum


Operations from the authority, which permit and any other permits,


authorisations and consents which are or may be applicable under the Current


Legislation, shall not be unreasonably withheld Gove mo rate agrees to


provide Contractor with all authorisations, permits, certificates and other


documents necessary for Petroleum Operations. If in the course of the


Petroleum Operations, the Govemorate provides other areas for Contractor's


activities, then new environmental baseline studies shall be included in the


Dev elopment Plan that includes these areas. The Northern Iraq Administration


shall indemnify the Contractor against any claim, damage or loss ansing from


such pre-existing environmental condition or damage, subject however, to the


Contractor having taken reasonable and appropriate precautions in conducting


Petroleum Operations, it being understood that in pursuing Petroleum


Operations the Contractor has assumed the risk of working in the Agreement


Area, and provided, further, that such indemnification shall not extend to any


natural pre-existing condition.


22.8. In conducting Petroleum Operations, the Contractor shall operate according to


Good Oilfield Practices and use best endeavours to minimise potential


disturbances to the environment, including the surface, subsurface, sea. air.


flora, fauna, other natural resources and property. The order of priority for


actions shall be protection of life, environment and property.


22.9. The Contractor shall take all necessary steps to respond to. and shall promptly


notify the Govcmoratc of. all emergency and other events (including


explosions, leaks and spills), occurring in relation to the Petroleum Operations


which are causing or likely to cause material environmental damage or


material risk to health and safety. Such notice shall include a summary’


description of the circumstances and steps taken and planned by the


Contractor to control and remedy the situation. The Contractor shall provide


such additional reports to the Authority as arc necessary in respect of the


effects of such events and the course of all actions taken to prevent further loss


and to mitigate deleterious effects.


22.10 In the event of emergency situations as set forth in 22.9, above, at the request


of the Contractor, the Govcmoratc. without prejudice and in addition to any


indemnification obligations the Northern Iraq Administration may have


hereunder, ahull ussist the Contractor, to the extent possible, in any emergency


response, remedial or repair efTort by making available any labour, materials


and equipment in reasonable quantities requested by the Contractor which are


not otherwise readily available to the Contractor and by facilitating the


measures taken by Contractor to bring into Northern Iraq Administration


personnel, materials and equipment to be used in any such emergency


response or remedial or repair efTort. Contractor shall reimburse the Northern


Iraq Administration's reasonable and necessary costs incurred in such efforts,


which reimbursed amounts shall be considered Costs and Expenses.


22.11. The Contractor shall not be liable to the Northern Iraq Administration or Third


Parties for any damages caused by contamination entering the Agreement


Area as a result of Northern Iraq Administration, or Third Party activities


beyond or within the boundaries of the Agreement Area. The Northern Iraq


Administration shall be legally and financially responsible for any loss,


damage and liability, including remediation of environmental conditions


which may be required for safe conduct of the Petroleum Operations, caused


by the Northern Iraq Administration's activities beyond or within the








22.12. The Contractor shall not be liable for any loss or damage, including but not


limited to spillage, explosion, contamination or similar environmental damage,


in respect of any storage facilities, pipelines or means of transportation which


arc not under the direct possession and control of the Contractor or its


Affiliates or its Subcontractors or the Operating Company. In addition to the


foregoing, the Contractor shall not be liable for any damage whatsoever in


respect of the Northern Iraq Administration share of Petroleum, storage or


transportation thereof once Govcmoratc has taken custody of the Govemorate


share of Petroleum.


22.13. The Nonhem Iraq Administration shall make best efforts to ensure the safety


and security of the Contractor’s property and personnel in Iraq and to protect


them from loss, injury and damage resulting from war (declared or


undeclared), civil conllict, sabotage, blockade, riot, terrorism, unlawful


commercial extortion, or organised crime. Notwithstanding anything to the


contrary contained herein, Contractor acknowledges and agrees that the


obligations undertaken by the Northern Iraq Administration in this Article


22.13 arc no greater than the general obligations of the Northern Iraq


Administration towards citizens of Northern Iraq Administration in respect to


the perils named above. Furthermore, Contractor agrees that it shall have no


claim for legal or equitable relief for failure of the Northern Iraq


Administration to comply with the provisions of this Article 22.13, except as


may be permitted by law.


22.14. Except as set forth in Article 28 hereof, it is understood and agreedthat the


Northern Iraq Administration shall not seek or declare any cancellation or


termination of this Agreement and/or the License as a result of the occurrence


of any emergency event described in this Article 22.





ARTICLE 23


mtSILNKEI











23.1 Contractor shall be entitled to bring Foreign Employees into Northern Iraq


Administration in connection with the performance of Petroleum Operations


"The entry into Northern Iraq Administration of such personnel is hereby


authorised, and the Northern Iraq Administration authorised body shall issue


at the Contractor's request the required documents, such as entry and exit


visas, work permits and residence cards. At Contractor's request, the Northern


Iraq Administration shall facilitate all immigration formalities at the points of


exit and entry into Northern Iraq Administration for the employees and family


members of the Contractor, its Affiliates, Subcontractors. Operator, agents and


brokers. The Contractor (or Operator on its behalf) shall contact the


appropriate offices of the Northern Iraq Administration to secure the necessary


documents, and to satisfy the required formalities.


23.2 The employees working within the scope of Petroleum Operations shall be


placed under the authority of the Contractor, its Affiliates, its Subcontractors,


agents or brokers or the Operator, each of which shall act individually in their


capacity as employers. The works, hours, wages, and all other conditions


relating to their employment shall be determined by the relevant employer of


such employees. In relation to employees who are citizens of Northern Iraq


Administration their employment shall be in accordance with the Cunent


Legislation. To the extent dial any expatriate personnel arc engaged under an


Agreement subject to the Current Legislation, that Agreement shall comply


with the provisions of the Current Legislation. The Contractor, its Affiliates,


its Subcontractors, agents or brokers however, shulI enjoy full freedom in the


selection and assignment of their employees.











40


 ARTICLE 24


EQ-RCF. MA.IKUKi;








24 I If ns a result of Force Majeure, Contractor is rendered unable, wholly or in


part, to carry out its obligations under this Agreement, other than the


obligation to pay any amounts due, then the obligations of Contractor, so far


as ami to the extent that the obligations arc affected by such Force Majeure,


shall be suspended during the continuance of any inability so caused, but for


no longer period. Contractor shall notify the Parties of the Force Majeure


situation within seven (7) days of becoming aware of the circumstances relied


upon and shall keep the Govemorate informed of all significant


developments. Such notice shall give reasonably full particulars of the said


Force Majeure. and also estimate the period of time, which Contractor will


probably require to remedy the Force Majeure. Contractor shall use all


reasonable diligence to remove or overcome the Force Majeure situation as


quickly os possible in an economic manner. The period of any such non¬


performance or delay, together with such period as may be necessary for the


restoration of any damage done during such delay, shall be added to the time


given in this Agreement for the performance of any obligation dependent


thereon (and the continuation of any nght granted) and to the term of this


Agreement.


24.2. For the purposes of this Agreement, "Force Majeure" shall mean a


circumstance which is irresistible or beyond the reasonable control of


Contractor, or any other hindrance of Contractor's performance not due to its


fault or negligence and shall be in accordance with the provision of the


Petroleum Law.








ARHCLE-25


ASSIGNMENTS AND GUARANTEES








25.1 No assignment, mortgage or charge or other encumbrance shall be made by a


Party of its rights obligations and interests arising under this Agreement other


[han in accordance with the provisions of this Article 25. Any purported


assignment made in breach of the provisions of this Article 25 shall be null


and void.


25.2. Save in the case of any assignment marie pursuant to the provisions of Articles


25.4, 25.5 and 25.6 the following shall apply. Any Parly wishing to assign all


or part of its rights and interests hereunder or in any circumstances where


there is deemed to be an assignment, the Party wishing to make the assignment


shall first give written notice to the other Parties specifying the proposal terms


and conditions of the assignment.


Following receipt of those terms and conditions, for a period of thirty (30)


days each Party shall have the preferential right to match the terms and


conditions of the proposed assignment or deemed assignment. This right may


be exercised by any Party giving written notice of its intention to match the


relevant terms and conditions (the “Acceptance") and thereafter the relevant


Parties shall negotiate all necessary documentation in good faith. If within a


further period of ninety (90) days from receipt of the Acceptance the relevant


parties have not reached final agreement the Party seeking to assign may


within a further period of thirty (30) days complete an assignment to a Third


Party on the same terms and conditions. For the avoidance of doubt any


assignment to a Third Party shall be subject to the assigning Party and the


Third Party complying with the provisions of this Article 25.


25.3 A Contractor Party may assign all or part of its rights, obligations and interests


arising from this Agreement to a Third Party provided that the Third Party :


a) has the technical and financial ability to perform the obligations to be


assumed by it under the Agreement; and


b) as to the interest assigned to it. accepts and assumes all of the terms


and conditions of the Agreement


Any such assignment shall be subject to the prior written consent of the


Govemorate which consent shall not Ik* unreasonably withheld or delayed. By


wuy of clarification, and not in limitation or the foregoing provisions of this


Article 25.3, the Northern Iraq Administration shall not be considered to be


acting unreasonably in declining to consent to any such assignment if the


assignment to such proposed assignee is deemed contrary to Northern Iraq


Administration interests, as evidenced by a writing to that effect signed by the


President, Minister. Chancellor, or the Minister of Foreign Affairs or Defence


or there is an act of Parliament to that effect.


If within thirty (30) Day's following notification of an intended assignment,


accompanied by a copy of the proposed deed of assignment and related


documentation with respect to the proposed assignee, including certified


financial statements and other evidence to the Northern Iraq Administration’s


reasonable satisfaction of the matters set forth in Article 25.3 and such


documentation, which shall include evidence of the identity of owners of the


assignee, provided in the ease of a company the stock of which is registered on


a recognised stock exchange, a copy of the documents identifying the


significant owners, as such concept is defined or used in the applicable laws


pursuant to which such company registered its stock, will satisfy the foregoing


requirements, and its direct and indirect parent companies, including the


identity of the owners of the ultimate parent, subject to the foregoing proviso,


as may be reasonably necessary for the Northern Iraq Administration, and as


requested by the Northern Iraq Administration, to make a determination of the


Northern Iraq Administration interests as desen bed above, the Northern Iraq


Administration has not given its written decision concerning such assignment,


then it shall be deemed that the Northern Iraq Administration has declined to


give such consent; provided that thereafter if upon the farther written request


of the Contractor for a written decision, the Northern Iraq Administration has


not given a written response of any kind within fifteen (15) Days after such


 further request, then the assignment shall be deemed approved and the


Northern Iraq Administration shall execute an assignment, in a form


acceptable to the Northern Iraq Administration, accepting such assignment,


This second request from the Contractor shall cite the provisions of this


paragraph and the Contractor shall obtain confirmation from the Northern Iraq


Administration that the request has been received. In the event of the transfer


of rights and obligations under the Agreement and License to a Third Party,


Contractor shall pay all costs associated with such transfer incurred by the


Agency and any tax or charge due on such transfer under the Current


Legislation.


25.4 A Contractor Party may assign all or part of its rights, obligations and interests





arising from this Agreement to another Contractor Party or Affiliate, without


prior consent of the Governoratc. provided that any such Affiliate:


a) has the technical and financial ability to perform the obligations to he





assumed by it under the Agreement; ami


b) as to the interest assigned to it, accepts and assumes all of the terms


and conditions of the Agreement


25.5 Each reference in this Agreement to the Contractor shall be treated as


including each assignee to which an assignment has been made pursuant to


this Article 25. Each reference in this Agreement to Governoratc shall be


treated as including each assignee to which an assignment has been made by


Govemorate pursuant lo this Article 25.


25.6 Govemorate may assign all or part of its rights, obligations and interests


arising from this Agreement (including all or part of its right to lift a share of


Profit Oil) to a wholly owned Affiliate or to any other sovereign state with the


prior consent of the Contractor and the Govemorate provided that any such


Affiliate or such other sovereign state:


a) has the technical and financial ability to perform the obligations to be


assumed by it under the Agreement; and


b) as to the interest assigned to it. accepts and assumes all of the terms


and conditions of the Agreement.


Govemorate shall give prior notice to the Contractor to any assignment under





this Article 25.6.


25.7 The Northern Iraq Administration may assign all or part of its rights,


obligations, and interests arising form this Agreement (including all or part of


its right to lift its share of Profit Oil) to a Third Party, provided, that any such


Third Party accepts and assumes all of the temrs and conditions of this


Agreement as to the interest so assigned. The Northern Iraq Administration


shall notify Contractor of such assignment within thirty (30) days of the


effective date of such transfer.





vn *1*1








43


25.8 Subject to the approval of the Govemorate in the event of there being any


proposed assignment in accordance with the terms of this Article 25 then to


the extent of the interest assigned the assignor shall be released from all


further obligations and liabilities arising under the Agreement after the


effective date of the assignment. I he assignee shall thereafter be liable for the


obligations arising from such interest in ihe Agreement except to the extent


provided in the Agreement.


ARTICLE 26


AGREEMENT ENFORCEMENT AND STABILISATION, A-NU


REPRESENTATIONS AND WARRANTIES


26.1 In the course of performing the Petroleum Operations, the Operator and die


Parties shall be subject to all applicable laws, decrees, rules and regulations.


26.2 The Northern Iraq Administration agrees and commits to Contractor, for the


duration of this Agreement, to maintain the stability of the legal, lax, financial,


mining’s, customs and economic import and export conditions of this


Agreement Furthermore the Govemorate hereby represents and warranmts


that the Govemorate already received the approval of the elected Parliament of


the Northern Iraq Administration which authorises the Govemorate to enter


into this Agreement.


26.3 The Parties agree to co-opcratc in every possible way in order to achieve the


objectives of this Agreement The Northern Iraq Administration and its


subdivisions shall facilitate the exercise of Contractor's activities by granting


it all decrees, permits, resolutions, licenses and access rights and making


available to it all appropriate existing facilities and services under the control


of the Govemorate so that the Parties may derive the greatest benefit from


Petroleum Operations for their own benefit and for the benefit of the Northern


Iraq Administration.


26.4 If at any time after this Agreement has been signed there is a change in the


applicable laws, regulations or other provisions effective Current Legislation


which to a material degree adversely affect the economic position of the


Contractor or any Contractor Party hereunder, the terms and conditions of this


Agreement shall be altered so as to restore the Contractor to the same overall


economic position as that which the Contractor would have been in had this


Agreement been given full force and effect without amendment


26.5 If the Contractor believes that its economic position has been adversely


affected, under Article 26.4 it may give notice to the Northern Iraq


Administration and to Govemorate describing how its position has been so


alTcctcd and the Parties shall thereafter promptly meet with a view to reaching


agreement on the remedial action to be taken. If matters have not been


resolved within 90 days or as otherwise agreed the matter may be referred to


arbitration by any Party in accordance with the provisions of Article 29.





MO


 26.6 The Northern Iraq Administration within the Current Legislation and its


capacities warrants to the Contractor as follows:





a) The Northern Iraq Administration has taken the appropriate steps


necessary to authorise the Go\emorate in Northern Iraq Administration


to execute this Agreement on behalf of the Northern Iraq


Administration and has the power to do so;


b) Ihc signatory to this Agreement on behalf of the Northern Iraq


Administration (in each of its capacities hereunder) is duly authorised


to bind Govemomte in Northern Iraq Administration;





c) Govemorate in Northern Iraq Administration has been legally vested


by the Northern Iraq Administration with the necessary power to


authorise Petroleum Operations in the Agreement Area ami to


compensate the Contractor by allocating to it a share of the Petroleum


produced in accordance with the terms of this Agreement.


d) Upon completion of the matters and procedures set out in Article 31


there is no other entity or authority whose approval or authorisation is


required to permit the Contractor to enjoy and enforce its rights


hereunder.


26.7 Contractor, represents and warrants that:


26.7.1 It possesses the technical expertise and financial resources to fulfil the


obligations of Contractor under this Agreement;


26.7.2 The execution, delivery and performance by Gencl Encrji A.S. of this


Agreement arc within the corporate powers of Gencl Encrji AS;


26.7.3 Gencl Enetji A.S., have obtained all corporate consents, approvals,


authorizations and resolutions in accordance with its corporate statutes


and the applicable laws to empower Gencl Enetji A S . to execute this


Agreement, to undertake all of the obligations of Contractor hereunder.





ABTiriJ. 27











27.1 Except as otherwise specifically provided, all notices authorised or required


between the Parties by any of the provisions of this Agreement, shall be in


writing in English and delivered in person or by registered mail or by courier


service or by any electronic means of transmitting written communications


which provides confirmation of complete transmission, and addressed to such


Parties as designated below. The originating notice given under any provision


of this Agreement shall he deemed delivered only when received by the Party


to whom such notice is directed, and the time for such Party to deliver any


notice in response to such originating notice shall run from the date the


originating notice is received. The second or any responsive notice shall be


 deemed delivered when received. “Received" for purposes of this Article with


respect to written notice delivered pursuant to this Agreement shall be actual


delivery of the notice to the address of the Party to be notified specified in


accordance w-ith this Article. Each Party shall have the right to change its


address at any time and'or designate that copies of all such notices be directed


to another person at another address, by giving written notice thereof to all


other Parties The addresses for service of notices on each of the parties are as


follows: -





Contractor: Gcnel Encrji A S.


Address: Buyukdcrc Caddcsi Yapi Kredi Plaza A.Blok Kat 12 80820 Levent Istanbul


Phone: +90 212 283 2888


Facsimile:+ 90 212 325 5814


Contact person: Tugrul Tokgoz


Governorate


Address: Sulaimanyah, Rzgari Boulevard, Prime Minister’s Headquarters


Phone: 315 CM) 15


Contact person:


27.2 Subject to the provisions of the Agreement, the Parties agree that all


information and data acquired or obtained by any Party in respect of


Petroleum Operations shall be considered confidential and shall be kept


confidential and not be disclosed during the term of the Agreement to any


person or entity not a Party to this Agreement, except:


a) To an Affiliate, provided such Affiliate maintains confidentiality as


provided herein;


b) To a governmental agency or other entity when required by the


Agreement;


c) To the extent such data and information is required to be furnished in


compliance with any applicable law s or regulations, or pursuant to any


legal proceedings or because of any order of any court binding upon a


Party.


d> To prospective or actual Contractors, consultants and attorneys


employed by any Party where disclosure of such data or information is


essential to such Contractor’s, consultant's or attorney's work;


e) To a bona fide prospective transferee of a Party's participating interest


(including an entity w-ith whom a Party or its Affiliates are conducting


bona fide negotiations directed toward a merger, consolidation or the


sale of a majority of its or an Affiliate's shares):


0 To a bank or other financial institution to the extent appropnatc to a


Party arranging for funding;


g) To the extent that any data or information which, through no fault of a


Party, becomes a part of the public domain.








46


 27.3 Disclosure as pursuant to Article 27.2 (d), (e), and (0 shall not be made unless


prior to such disclosure the disclosing Party lias obtained a written undertaking


from the recipient party to keep the data and information strictly confidential


for at least three (3) years and not to use or disclose the data and information


except for the express purpose for which disclosure is to be made.





ART1CLL 28





TF.RMirSAHU.V AM) BREACH








28.1 At any time, if in the opinion of Contractor, circumstances do not warrant


continuation of the Petroleum Operations, Contractor may. by giving written


notice to that effect to the Governorate relinquish its rights and be relieved of


its obligations pursuant to this Agreement except for Contractor’s obligations


to complete the Minimum Work Program, except such rights and obligations


as related to the period prior to such relinquishment. Neither this Agreement


nor any of the rights granted hereunder nor the Operator Licence may be


terminated as a result of any act or omission of Operator save in the ease


where Operator has carried out an act or omitted to do something at the


specific request of the Contractor and Operator has previously advised the


Contractor prior to carrying out the act or omitting to do something that to


carry out that act or to omit to do the relevant thing may result in this


Agreement being terminated.


28.2 The Governorate and/or the Northern Iraq Administration is entitled to


terminated this Agreement by giving ninety (90) days advance written notice


thereof to all Parties, when Contractor commits a matenal breach in relation


with its obligations indicated in the Agreement or if Contractor has not


accomplished its warranties according to Article 26.7. In case the Governorate


is satisfied with the remedy plan presented by the Contractor after reviving the


termination notice, the remedy period may be extended for a term as approved


by the Governorate. The termination notice will be effective at the end of the


arbitration procedure in ease the claim of material breach is applied to


arbitration as stipulated in Article 29.


ARTICLE 29








29.1. The Parties hereby consent to submit to the International Centre for Settlement


of Investment Disputes any dispute in relation to or arising out of this


Agreement for settlement by arbitration, pursuant to the Convention on the


Settlement of Investment Disputes.





29.2 The Parties agree that, for the purposes of Article 24< I) of the Convention, any


dispute in relation to or arising out of this Agreement is a legal dispute arising


directly out of any investment, and this article has force only if all the


requirements of Article 29.1 arc followed.


VI0


 29.3 For the purposes of Article 24(2) of the Convention, it is agreed that, although


Gcncl Eneiji A.S. is a national of Republic of Turkey, and shall be treated as a


national of that Northern Iraq Administration for the purposes of the


Convention.


29.4 A Party need not exhaust administrative or judicial remedies prior to


commencement of arbitrage proceedings.


29.5 Any arbitrage tribunal constituted pursuant to this Agreement shall apply the





provisions of this Agreement as supplemented and interpreted by general


principles of the Current Legislation and England as are in force on the


Effective Date. In case these principles are in conflict with each other. Current


Legislation shall prevail. The seal and venue of the arbitration will be London.


United Kingdom.


ARTICLE 30





TEXT


30.1. This Agreement shall be executed in three (3) originals in the in the English





language, which will be duly certified by a competent authorised body


selected by the Northern Iraq Administration.





A&11CLK 31


Afmn AL A>D EFFECtlM 1)A11.








31.1 This Agreement shall enter into force and efTecl in its entirety on the Effective


Dale. The Effective Date shall be the date on which the following conditions


have been fulfilled:


31.1.1 The Govemoratc issues the License to Contractor,





31.1.2. Govemoratc has obtained the consent or approval from the Tax


Inspectorate for Northern Iraq Administration (or its successors or assigns) to


assume, pay and discharge, in the name and on the behalf of Contractor.


Contractor's entire Tax liability for each Agreement Year.


31.1.3. Co-ordination Committee resolution:





a. in the affect of resolving the issues related the allocation of the


additional benefit to Govemoratc from the Reserved Production


between the Govemoratc and the Contractor in case of the upgrade


of the existing domestic refinery or erection of a new refinery or


export of crude oil;














48


 b the method of mitigating the losses of the Reserved Production








c. The cost of the refining process to determine the sale price to the


existing domestic refinery; and





d. The allocation of the petroleum products avai lablc to the Contractor


by taking into consideration the supply of the Reserved Production


and the Petroleum sold to the existing domestic refinery.





31.2. Notwithstanding any other provision of this Agreement to the contrary.


including, but not limited to Article 28. if after the expiration of one (1) year


from the date of the execution of this Agreement by all Parties, the Effective


Date, as determined by provisions of Article 31.1. has not occurred, then the


Uccroc and this Agreement shall terminate and neither shall be of any further


force and effect.


31.3. Notwithstanding any other provision of this Agreement to the contrary, in ease





the Contractor fails to fulfil its obligations mentioned in the Minimum Work


Program and Budget as indicated in Annex C within four (4) months or in ease


the Co-ordination Committees decision to defer the mobilisation of equipment


due to evidenced technical reasons or availability, this Agreement may be


terminated at such deferment date.


By execution hereof, the Govemorate in Northern Iraq Administration, acting in


its capacity as the sovereign representative of Northern Iraq Administration


pursuant to the Current legislation joins as a Party to the foregoing Production


Sharing Agreement as amended, and consents to the provisions thereof.





Signed and sealed this sixteenth day of July, 2002 in two (2) copies in English


language.








For Govemorate on behalf of the For Contractor


NORTHERN IRAQ GENEI.ENER.H A S.


ADMINISTRATION





Authorised Representative


Mehmet Sepil














ANONIM $iRKETi




















VlO-Sij.",‘,>,K

^ I*Ageteiinl


49