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 CONTRACT FOR OPERATIONS OF PETROLEUM EXPLOITATION


NUMBER SXX HYPHEN NINETY THREE (6-93) EXECUTED BETWEEN


THE MINISTRY OF ENERGY AND MINES AND


PENTAGON PETROLEUM, INC.








In the city of, Guatemala the fifteenth (15th) day of October of


nineteen hundred ninety three (1993), Engineer Jose Luis Terron


Calderon, fifty-two (52) years of age, married, a native


Guatemalan, Crvil Engineer, at this address, as a representative


of the Government of the Republic, acting in his capacity as


Minister of Energy and Mines of the Ministry of Energy and Mines


(hereinafter referred to as the "Ministry"), acknowledged that he


is authorized to act in said capacity as set out in Government


Agreement number two hundred eighteen (218) dated the first (1st)


day of July of nineteen hundred ninety three (1993) and by


certification of Act number thirty nine hyphen ninety three (39-


93) dated the first (1st) day of July of nineteen hundred ninety


three (1993) which certify that he took possession of said duty,


on the one part, and on the other part Maria Galvez Salazar,


thirty-nine (3 9) years of age, single, a native Guatemalan,


Assessor of Businesses, at this address, acting in her capacity as


Legal Representative of the entity Pentagon Petroleum, Inc., an


Entity organized in accordance with the laws of the State of


Louisiana, United States of America to certify which the First


Original Testimony of Public Writing required by Protocol Mandate


number eight (8) , by authorization in this city of Notary Pedro


Leonel Brolo . Campos dated the sixteenth' (16th) day of November of


nineteen ninety two (1992), recorded in the General Archive of


Protocol under number two hundred thousand forty-nine six hundred


fifty-seven (249,657), dated the nineteenth (19) day of November


of nineteen hundred ninety two (1992) and the Mercantile Registry


under number fifteen thousand eight hundred and forty-five


(15,845), folio two hundred twenty-one (221), of book fourteen


(14) of Mandates, dated twenty fourth (24) of March of nineteen


hundred and ninety three (1993) (hereinafter referred to as the


"Contractor”) . All of the related documents were seen before me


and the responsibilities that are exercised are extensive and


sufficiently comply with the Law of Hydrocarbons, Legal Decree


number 109-83 and the decrees of the Ministry of Energy and Mines;


numbers 671 and 1273 that textually say "BUSINESS OF MINISTRY OF


ENERGY AND MINES: Guatemala, the twenty -sec ond (22nd) day of June


of nineteen hundred and ninety three (1993). ISSUE: the


QUALIFICATION COMMITTEE, presents documentation and reports of


qualification, for the final decree, with regard to the bid


presented by PENTAGON PETROLEUM, INC.", in compliance with the


Call of Bids of the Government Agreement number 7 64-92 dated che


7th day of September of 1992 (9/7/92) to execute Contracts tor


Operations of Petroleum Exploration and Exploitation of


Hydrocarbons from AREA A-3-92, 671. Witness here the report


presented by the Qualification Committee of Bids identified in tche


paragraph and, WHEREFORE: That the following Government Accord


number 764-92 dated the seventh day of September 1992 (9/7/92) ,


call of bids was issued to all interested 'individuals or legal


entities, nationals or foreigners, to offer bids .for the execution


of Contracts for Operations of Petroleum of Exploration and


Exploitation, which areas include the blocks identified in Article


1 of the Agreement of this Ministry number 170-92 dated the 9th


day of October 1992 (10/9/92). WHEREFORE: That the Article 11 of


the Call of Bids of Agreement precepts that the bids will be


received by the General Director of Hydrocarbons or in the


alternative, by his General Sub-Director, at the Directory of


Hydrocarbons of this Ministry on the dates established in Article


nine (9) of Government Agreement number 883-92, the bid for Atrea


A-3-92, already having been made by the entity Pentagon Petroleum,


Inc., and taken its course and the respective requisites complied


with, the Qualification Committee appointed for this purpose by


Ministerial Agreement number OM-2 04-92 dated 27th day .of November


of 1992 (11/27/92), after corresponding analysis and content with


the report - concerning the technical-financial capacity ■ of the


bidder, presented to this Ministry, all of the documentation


relative to the bid, as well as final reports relating to same.


WHEREFORE: That in accordance with that set out in Article 12, 13


and 14 of the Call of Bids of Government Agreement number 764-92,


the Qualification Committee analyzed the bid presented by the


Pentagon Petroleum, Inc. company with respect to the basic minimum


established in said Agreement, reaching the decision to recommend


to this Ministry that the adjudication be approved" in favor of the


bidder. WHEREFORE: That in accordance with the precepts, in


Article 22 of the Government Agreement number 764-92, the Ministry


of Energy and Mines did expressly reserve concerning its


administrative authority to accept or reject the qualified bid,


THEREFORE: In accordance with the clauses considered, reports


presented, articles cited and, further, that set out in Articles


28 of the Call of Bids of Agreement for the Execution of Contracts,


for Operations for Petroleum Exploration and Exploitation of


Hydrocarbons and 2, subparagraph b) , of the Decree number 57-78 of


the Congress of the Republic, modified by Legal Decree numbers 75-


82, 86-63 and 106-83, this Ministry, upon resolution, DECLARES:


I) That it accepts the bid presented by the PENTAGON PETROLEUM,


INC. company, and as a consequence, it awards the blocks


identified as LA-9-92, L-9-92, and L-10-92, that integrate the


Area of Contract A-3-92, which is the object of the call of bids


and that comprises a' surface area that totals ONE HUNDRED THIRTY


THOUSAND ONE HUNDRED EIGHTY SIX AND TWENTY-NINE HUNDREDTHS


HECTARES (130,186.29 hecs.), which description per block is set


out in Article 1 of the Agreement of this Ministry number 170-92


dated the ninth day of October of 1992 (10/9/92). II) The time


period set for sixty (60) days counting according to that set out


in the Law of this Legal Organization, in order to execute the


respective Contract for Exploitation, in accordance with the Model


Contract approved in Government Agreement number 1226-87, dated


the 28th day of December 1987 (12/28/87) and its modifications.


Ill) That before signing the respective contract, PENTAGON


PETROLEUM, INC. company should make effective the amount of ONE


HUNDRED THOUSAND QUETZALES (Q. 100,000.00) in accordance with the


rate for execution of the respective Contract for Exploitation,


the same as the equivalent in quetzales of thirty five cents per


United States of America Dollar (U.S. $.0.35) for each complete


hectare including the area of the contract, that amount to FORTY-


FIVE THOUSAND FIVE HUNDRED SIXTY FIVE AMD TWENTY CENTS IN UNITED


STATES OF AMERICA CURRENCY (U.S. 45,565,20), in the General


Directory for Internal Revenue of the Ministry of Public Finance,


with a further duty to comply with presenting the guaranty that is


referred to in Article 116 of the General Regulation of the Law of


Hydrocarbons, modified by the Governmental Agreement number 753-


92. IV) That the entity PENTAGON PETROLEUM, INC., shall comply


with that established in Article 14, subparagraph a) , Addendum 4,


last paragraph of the Regulation of Call of Bids for the execution


of the Contracts for Exploration and Exploitation of Hydrocarbons,


at the latest within five days' before the date established in


order to begin operations and also in order to comply with the


established date to initiate operations to further comply with


Article 8 of the Law of Protection and Improvement of the


Environment, Decree number 68-86 of the Congress of the Republic


and its Amendments. Furthermore it shall be subject to the


dispositions of the Law of Hydrocarbons, its General Regulations


and other applicable laws. V) That before the execution of the


contract, the PENTAGON PETROLEUM, INC. company shall prove with


receipt of payment indicated in the previous point III) and to


have established the respective guaranty, all of that by means of


the presentation of the corresponding legal documents and also to


show the draft of the respective contract in order to be analyzed.


VI) NOTIFY the interested parties and the Department of the


Office of the Auditor and Controller, in order to extend and give


the orders of corresponding payments from the bidder to make them


effective in the indicated manner in this decree. F) Illegible


signature of Engineer Cesar Augusto Fernandez F. , Minister of


Energy and Mines. F) Illegible signature of Lie. Leandro Raul


Villatorro Resinos, Vice-Minister of Energy and,Mines. Is on the


seal that says: Ministry of Energy and Mines. Republic of


Guatemala. Ministry of Energy and Mines, MINISTRY OP ENERGY AND


M'lNES: Guatemala, seventh (7th) of October of 1993 (10/7/93).


BUSINESS ISSUE: PENTAGON PETROLEUM, INC. requests renewal of the


original term for execution of the Contract for Exploitation for


Area A-3-92, 1273. I) Incorporate into the previous record that


precedes: II) The term is renewed in order to execute the Contract


for Exploitation for the Area A-3-92, until the fifteenth (15th)


day of October of the year in course; the interested party, should


present on the thirteenth (13th) day of the current, the


description of the work to realize it as the contractual


compromise, like the documentation that verifies the person of the


Legal Representative of the entity. NOTIFICATION: F) Illegible


signature of Engineer Jose Luis Terron Calderon, Minister of


Energy and Mines F) Illegible signature of Engineer Larry Adrade


Lara, Vice-Minister of Energy and Mines, is on the seal that says:


Ministry of Energy and Mines, Republic of Guatemala. In virtue of


this, the parties agree to execute the following CONTRACT FOR


OPERATIONS OF PETROLEUM EXPLOITATION that hereinafter will be


referred to as "Contract", containing the following clauses:


FIRST CLAUSE


DEFINITIONS AND ABBREVIATIONS


Further to the definitions and abbreviations set out in the


Law of Hydrocarbons and in their General Regulation, the following


will be used for the effects of this contract:


DEFINITIONS


ACCOUNTING ADDENDUM: Is the document added to this contract


that is referred to in subparagraph a), of Article 66 of this Law.


PHASE OF DEVELOPMENT AND PRODUCTION OR PERIOD OF


EXPLOITATION. Is the definition in the Sixth Clause of this


Contract.


PHASE OF EVALUATION: Is that defined in the Sixth Clause


subparagraph 6.1.1 of this contract.


ABBREVIATIONS





DOLLAR: Dollar of the United States of America.


GENERAL REGULATION: Is the General Regulation of the Law of


Hydrocarbons.-





SECOND CLAUSE


OBJECT OP THE CONTRACT


2.1. The present contract is executed with the objective that the


contractor perform the operation of exploitation in accordance


with the approved programs, within the area of the contract,


obtain the maximum recuperation of reserves of hydrocarbons of the


petroleum fields discovered by the wells Las Casas 1-X and Huapa


1-X, and from wells that are to be discovered, which shall be


produced at " optimum rates of production, with the appropriate


diligence to ensure the most benefit to the State in accordance


with the Law, the regulations and this contract. The contractor


shall be able to execute operations for exploitation within the


area of the contract.


2.2. The contractor is bound to comply with the obligations set


out in the present contract, proportioning for services and


technical-financial resources that, are required; and assume the


obligations that are demanded of exploitation and/or exploration.


2.3. It remains expressly stipulated that the State does not


assume for any reason, any risk or responsibility for the


investments and operations of exploitation and/or exploration that


are realized, nor for whatever unproductive result the same may


have, even if the acts or deeds are the result of an action of the


contractor authorized and approved by the Ministry or the Board of


Directors.


2.4. It is understood between the parties that the value of the


production of hydrocarbons and other associated substances, the


determination of the recoverable costs, the remuneration of the


contractor, the income that for whatever reason, belongs to the


State, in compliance with the Law, its General Regulation and this


contract; as well as the calculations involved shall be


effectuated in dollars or its equivalent in national currency, and


utilized for this purpose, in the corresponding rate of exchange.


2.5. The parties to this contract agree that the amounts


specified in quetzales in Articles 34, 35, subparagraph c) and 45


of the Law, and in Article 187 and Chapter V, Title VIII of the


General Regulation will be expressly understood in dollars.-


 THIRD CLAUSE





RIGHTS OF THE CONTRACTOR


3.1. The contractor will benefit, in accordance with the Law, its


General Regulation, this contract and Addendum, from the following


rights:





3.1.1. To execute by himself the operations of exploitation


and/or exploration within the area of the contract;


3.1.2. To transport within the national territory, individuals


or articles destined to related operations within the


area of the contract, subject to legal dispositions of


the material;


3.1.3. To import, in accordance with the regiment of free


importation and/or temporary suspension, the functional


articles, machinery, equipment, spare parts and


accessories that are required for the petroleum


operations derived from this contract, like re¬


exporting those that would have been imported for


petroleum operations;


3.1.4. To separate, purify and compress the hydrocarbons that


are produced and transported within each area of


exploitation. To transport the hydrocarbons that are


produced within the different areas of exploitation


that are selected by the contractor, located in blocks


LA-9-92, L-9-92 and L-10-92;


3.1.5. To process and/or liquify the natural gas, sulfur


and/or other substances;


3.1.6. To recover all of the recoverable costs attributable to


the area of the Contract and receive a part of the


hydrocarbons and other compatible substances in each


area of exploitation, with the concept of total


remuneration for the services and for the technical and


financial concepts assumed in accordance with this


contract;


3.1.7. To use, sell, dispose of, 'commercialize and export in


the most convenient manner, the hydrocarbons and other


substances that are related to same, except for that


agreed to in the Fourteenth Clause of this Contract;


To return one or more parts of the original area of the


contract, after all the obligations have been complied


with that were acquired related to these areas, and are


demandable on the effective date of devolution;


To-transport the corresponding hydrocarbons by whatever


means or stationary transportation established by the


State or by other contractors in a non'dis criminatory


form, with respect to services and tariffs; and when


these facilities do not exist that permit economical


transportation of said hydrocarbons, to petition the


direct execution of . a contract for stationary


transport ;


To petition that certain information remain


confidential;


To petition, by means of the Board of Directors, the


facilities for construction and others that are


necessary for the normal and adequate development of


the operations of exploitation and/or exploration which


can be authorized if the Ministry deems them convenient


for the accomplishment of the contract in accordance


with the legal dispositions related thereto;


To return to the exterior, the foreign capital


invested, as well as the external costs of operation,


utilities, loans made and their interest rates, and


other similar concepts, in accordance with this


contract and the regulation for the rate of exchange


emitted by the Monetary Board by means of decree number


JM hyphen one hundred thirty-two and eighty-four (JM-


132-84), published in the Diario Official the twenty-


eighth (2 8 th) day of June of nineteen hundred and


eighty four (1984) , that forms a part of this contract


and is incorporated herewith for all purposes;


Assign, in total or in part, the rights of this


contract, only if the assignee assumes the obligations


derived therein;


Consider this contract terminated, at any moment,


provided that it has. been complied with respect to all


the obligations acquired that are demanded on the date


in which the obligations terminated;


3.1.15. To receive from the Board of Directors the information


and technical data available concerning the area of the


contract;


3.1.16. Whatever else.the Law establishes, and the regulations


and the stipulations of this contract.-





FOURTH CLAUSE


TERM OF THE CONTRACT


The term of the present contract is twenty-five (25) years,


counting from the date it becomes valid unless it is terminated by


some occurrence in the clauses established in the Law, the General


Regulation and the stipulations of this contract.-


FIFTH CLAUSE


AREA OF THE CONTRACT


5.1. The original area of the contract has a total surface of one


hundred thirty thousand one hundred eighty six hectares with


twenty nine hundredths of hectares (130,186.29 Hecs.), and is


integrated with the following blocks of exploitation:


5.1.1. BLOCK "LA-9-92". Described as follows, to-wit:


Starting from the point of intersection of the meridian


eighty-nine (89) degrees with fifty-seven (57) minutes


and forty (40) seconds with the parallel sixteen (16)


degrees with seven (7) minutes exactly, is followed the


parallel due East until its Intersection with the


meridian eighty-nine (89) degrees with fifty-two (52)


minutes exactly. From this point you follow the


meridian due South until the Intersection with the


parallel fifteen (15) degrees with forty-five (45)


minutes and forty-three (43) seconds. From this point


you follow the parallel due West until its Intersection


with the meridian eighty-nine (89) degrees with fifty-


seven (57) minutes and forty (40) seconds. From this


point you follow the meridian due North until its


Intersection with the parallel sixteen (16) degrees


with seven (7) minutes that is the point of origin.


SURFACE: Is the previously described block which covers a


surface of thirty-nine thousand eight hundred and four


hectares with seventy eight hundredths of hectares


{39,804.78 Has.)


5.1.2. BLOCK "L-9-92". Described as follows, to-wit:


Starting from the point of Intersection of the meridian


eighty-nine (89) degrees with fifty-two (52) minutes


exactly with the parallel sixteen (16) degrees with


seven (7) minutes exactly you follow the parallel due


East until its Intersection with the meridian eighty-


nine (89) degrees with thirty-nine (39) minutes and


eight (8) seconds. From this point, you follow the


meridian due South until its Intersection with the


parallel fifteen (15) degrees with fifty-six (56)


minutes and fifty-three (53) seconds. From this point


you follow the parallel due West until its Intersection


with the meridian eighty-nine (89) degrees with fifty-


two <52) minutes exactly. From this point, you follow


the meridian due North until its intersection with the


parallel sixteen (16) degrees with seven (7) minutes,


that is the point of origin.


SURFACE: Is the previously described block which covers a


surface of forty-two thousand eight hundred and eighty-


seven hectares with sixty-five hundredths of hectares


(42,887.65 Has.)


5.1.3. BLOCK "L-10-92", Described as follows, to-wit: Starting


from the point of Intersection of the meridian eighty-


nine (89) degrees with fifty-two (52) minutes exactly,


with the parallel fifteen (15) degrees with fifty-six


(56) minutes and fifty-three (53) seconds when you


follow the parallel due East until its Intersection


with the. meridian eighty-nine (89) degrees with thirty-


nine (39) minutes and eight (8) seconds. From this


point, you follow the meridian due South until its


Intersection with its parallel fifteen (15) degrees


with forty-five - (45) minutes and forty-three (43)


seconds. From this point, you follow the parallel due


West until its Intersection with the meridian eighty-


nine (89) degrees with fifty-two (52) minutes exactly.


From this point you follow the meridian due North


until its Intersection with its parallel fifteen (15)


degrees with fifty-six (56) minutes exactly, that is


the point of origin.











/ ^


SURFACE: Is the previously described block which covers a


surface of forty-seven thousand four hundred ninety-


three with eighty-six hundredths of hectares (47,493.86


Has.).


5.2. At the end .of the phase of the evaluation, if the contractor


has complied with the obligations relative to same, he will, have


the option to relinquish one or more blocks of exploitation or the


total area of the contract.-


5.3. Terminating the phase of evaluation only the contractor may


retain the selected areas of exploitation from each block for


exploitation.-


5.4. The contract may select and retain for each commercial


field, an area that covers said field but that does not exceed the


ten thousand (10,000) hectares, except in special cases in which


the magnitude of the oil field deposits require a larger


extension, in accordance with General Regulations. -


5.5. When, for whatever reason, the commercial production is


finalized in any area of exploitation, the contractor shall return


the area that is referred to.-


5.6. The area of the contract has been delineated with the


exclusive purpose to determine the surface of the terrain of the


Republic, on which the contractor shall realize the operations


which are the object of 'this contract in accordance with Law, the


General Regulation and the contract; and shall in no way


constitute property or concession in favor of the contractor or


third parties with reference 'to said surface area, the ground,


underground or any natural resource that may be found.-


SIXTH CLAUSE


PHASES AND PROGRAMS


6.1. The term of the contract is divided into two phases:


6.1.1. The phase of the evaluation that, for the effects' of


the application of the regulations and accounting


addendum, is equivalent to the period of exploration to


which the same refer, comprise the first year of the


contract extendible for one equal period, with previous


petition of the contractor made at least one month


before the first year of the contract terminates,


extension which shall be extended by the Ministry when


any of the following circumstances shall occur;


6.1.1.1. When the evaluation tests have not been finished


in any of the wells that are referred to in


the Seventh Clause of this contract •


6.1.1.2. When in order to determine the commercial value of


the field discovered by 'one of the wells that


are referred .to in the Seventh Clause of this


contract/ further to proof of the evaluation


realized 'in said well, it shall become


necessary to drill at least one well to


evaluate, or in the case of having drilled


when the evaluation tests have not been


concluded; and


6.1.1.3. When circumstances similar to the previous ones


require the realization of additional works


to those normally planned or justified, upon


approval of the Ministry, to extend the


period of evaluation during the second year


of the contract.-


6.1.2. The phase of the development and production that is the


same as the period of exploitation and for which each


area of exploitation is initiated on the date


established in a commercial field ' and terminates for


each area of exploitation when the commercial


production of same is terminated or when the contract


terminates for whatever cause, whichever shall occur


first.-





6.2. If the contractor does not select at least one area of


exploitation before finalizing the phase of evaluation, the


contract terminates automatically.-


6.3. Within the first three (3)' successive months after the


effective date, the contractor shall present a program of


evaluation for the first year of the contract and, when


applicable, together with the petition for extension that is


referred to in paragraph 6.1.1. of this contract, the program of


the corresponding evaluation. With respect to the presentation


and content of said programs, by analogy, it shall be as set forth


in the General Regulations for a program of exploration. -


6.4. The program for evaluation of a new discovery of


hydrocarbons within the blocks of exploitation that are different


from the discoveries of the wells described as: Las Casas 1-X and


Huapan 1-X, shall be in addition to any other obligation that the


contractor has in compliance with the Seventh Clause and number


8.5 of this contract.


6.5. The requirements for work programs that are executed in the


phase of evaluation and period of exploitation shall be approved


prior to their execution, which in no way shall affect the


obligation of the contractor to fulfill same. However, according


to the emergency circumstances involved, the contractor is not to


take any action or initiative in order to confront an emergency


situation that will cause danger or loss of life and property.


Said emergency shall immediately be communicated to the Ministry


and the Board of Directors for effective measures to be


undertaken.-


6.6. When for any reason a budget that corresponds to the work


program is approved with a prior date to the date of execution,


the approved recoverable costs in said budget will be retroactive,


beginning with the date on which it was signed.-


6.7. In the resolution for approval of the budget for


exploitation, in compliance with the General Regulation, the


Ministry will give its authorization for the contractor to retain,


from the net production, less the royalty, whichever is necessary


for the reimbursement of the accumulated recoverable costs and


from the budgets for evaluation and/or exploitation, in accordance


with the work program, without prejudice to the verifications and


adjustments that shall be necessary, in accordance with the


General Regulation and this contract. -


SEVENTH CLAUSE


WORKS AND TERMS TO BEGIN SAME


7.1. The contractor shall be obligated to effectuate in the phase


of evaluation, the following works:


7.1.1. In the structure Las Casas, located in block "L-10-92",


there shall be realized the evaluation for the


structure, and there shall be a reconditioning of the


well Las Casas 1-X, with the objective to evaluate the


horizon Coban C, to obtain the parameters necessary, to


determine if the discovery is commercial.


7.1.2. In the structure Huapac, located in block "L-9-92"


there shall be realized the evaluation for the


structure, and there shall be a reconditioning of the


well Huapac 1-X, with the objective to evaluate the


horizon of Coban D, to obtain the parameters necessary,


to determine if the discovery is commercial.


7.1.3. Reprocessing of one hundred (100) kilometers of seismic


lines already in existence.


7.1.4. Drilling of one (1) well for rights in favor of the


Municipality of Fray Bartolome de Las Casas.


7.2. The period • to initiate the works that are referred to in


number 7.1, above, shall be six (6) months counting from the


effective date of the Contract.








EIGHTH CLAUSE


DISCOVERIES OF HYDROCARBONS


8.1. In the event of any discovery of hydrocarbons, the


contractor shall immediately communicate it to the Board of


Directors and shall proceed in compliance with the General


Regulation, -


8.2. Before permanently abandoning any well in which hydrocarbons


are discovered, the contractor shall communicate, in writing, same


to the Board of Directors stating that he or the discoveries do


not merit evaluation and it will be agreed to in number 8.3 of


this contract.-


8.3. When the Ministry considers that an explored well merits


being submitted to evaluation tests and the contractor disagrees


with this viewpoint, expressed in writing in accordance with


number 8.2 above, the following should be enforced:


The Contractor, by the same act, will transfer to the


8.3.1.


Ministry, . the right to execute under its own


responsibility the cited proofs, before abandoning the


subject well, with the equipment that the contractor


shall have available in the place where the exploratory


well is located on the date of the notification that is


 referred to in number 8,2 of this contract;





8.3.2. The Ministry, in order to exercise its acquired rights


indicated in the previous subparagraph,' within the


period of three (3) days counting at the start of the


date aforementioned, shall require of the Contractor


that use be made of the services of his Contractors for


Petroleum Services, in accordance with the prices and


conditions agreed to in the respective Contract for


Petroleum Services, at his opportunity delivering to


the Ministry the invoices corresponding to same, which


shall be paid within the following month from the date


of receipt of same;


8.3.3. The Contractor, without prejudice to the right of


recoverable costs incurred that may be recovered in


accordance with the Eleventh Clause of this Contract,


waives from the moment that he expresses same in number


8.2 of this contract, any right related to or derived


from the exploration or exploitation, as the case may


be, in the respective petroleum field, including the


confidentiality of the information with respect to the


referenced area where the oil field deposits are


located;


8.3> 4. Upon requirement from the Ministry, the Contractor


shall return the area selected by the Ministry that is


sufficient to cover the respective petroleum field,


which shall be adjusted to that set out in the General


Regulation; and


8.3.5. If the operations completed by the Ministry cause a


delay in the fulfillment of the drilling of a well with


the same equipment, in a determined annual period of


time, the Ministry shall consider a moratorium to the


Contractor for it to be completed. Said moratorium in


no case will be more than the time employed by the


Ministry in the operations that cause said delay.


8.4. The discovery of hydrocarbons in commercial quantities shall


obligate the contractor to select the area of exploitation and to


delineate, develope and exploit, with due diligence, the


referenced oil field deposit(s).


8.5. The contractor shall have an obligation to drill in each


commercial field, at least, one development well per year, until


having completed the development of the field or until the area of


exploitation where it is located is returned, whichever occurs


first. In any event, the contractor shall complete, within the


four (4) first years of the period of exploitation, of each area


of exploitation, the development of the commercial field, and will


initiate and regularly continue the commercial production, in


accordance with the General Regulation.


NINTH CLAUSE


GUARANTIES AND PINES FOR FAILURE TO COMPLY


9.1. The contractor is obligated to present before the Ministry,


the guaranty in accord and satisfaction of the State to answer for


the works that are referred to in number 7.1 of this contract,


which cost shall be equivalent to the maximum fine applicable in


case of failure to comply, in accordance with number 9.4. -


9.2. The contractor shall guaranty in favor of the State before


the initiation of each year, in accordance with the effective date


of the corresponding selection, in compliance of the General


Regulation, the drilling of wells for development, that are


referred to in number 8.5 of this contract; which guaranty amount


shall be equivalent to the maximum fine applicable in case of


noncompliance, in accordance with number 9.5.-


9.3. Upon finalizing the drilling of a well or of any compromised


work, the Ministry, upon petition of the contractor, previous


report to the Board of Directors, and opinion of the Commission


will release, partially or totally, as the case may be, the


respective guaranty.-


9.4. The maximum applicable fines- in case of noncompliance of the


works that are referred to in number 7.1 of this contract, are the


following: - In accordance with the resolution of the General Board


of Directors of Hydrocarbons number one thousand two hundred


forty-four (1,244) dated the thirteenth (13th) day of August of


nineteen hundred and ninety three (1993) the fines will be:


9.4.1. In - the case of well Las Casas 1-X the amount of three


hundred thousand dollars (U.S. $300,000.00);


9.4.2. In the case of well Huapac 1-X the amount of two


hundred and fifty thousand dollars (U.S. $250,000.00) ;


and














i &


3.4.3, In the ease of reprocessing of one hundred (100)


kilometers of seismic lines an amount of twenty-five-


thousand dollars (U.S. $25,000.00).





9.5. The maximum fine applicable in case of noncompliance of the


works that are referred to in number 8.5, of this contract, is one


thousand five hundred dollars (U.S. $1,500.00) per meter of depth


not drilled or the cost per meter upon drilling approved by means


of the budget, whichever is more.-








TENTH CLAUSE


ROYALTIES


10.1. The contractor shall pay to the State, with priority to the


recuperation of any cost, according to the Law, the General


Regulation, and this contract, the royalties that are due it.-


10.2. The royalty will be twenty percent (20%) for the net


production of crude petroleum with gravity of thirty (30) degrees


API. The percentage aforementioned will be increased or decreased


in one percent (1%) for each API degree more or less up to thirty


(30) degrees API, respectively; and, in no case, shall the royalty


be less than five percent (5%).-


10.3. If there should be production of crude petroleum proceeding


from any discovery not declared as commercial, the -contractor


shall pay a special royalty of thirty-five percent (35%), in


accordance with General Regulation. The royalty aforementioned


constitutes the only royalty due for the aforementioned production


until the effective date of selection, it being understood that at


the beginning of that date the royalty set out in the previous


number will be applicable.-


10.4. The contractor shall pay a royalty of five percent (5%) of


the net production of natural commercial gas and condensates.-


10.5. The contractor shall pay a royalty of five percent (5%) of


the net production of sulfur and/or other substances.-








ELEVENTH CLAUSE


RECOVERABLE AND NQNRECOVERABLE COSTS


11.1. The contractor shall have preference with priority to the


volumes of net production, sulfur and other substances that relate


to recoverable costs, with the exception of the royalty agreed to


in the Tenth Clause of this contract and previous authorization of


the corresponding amounts on the part of the Ministry. When


applicable, the contractor shall also be able to retain its


recoveries with respect to the area of the contract. The


contractor shall, except for that agreed to in the Fourteenth


Clause of this contract, dispose of, use, sell, commercialize and


export the part of the net production, sulfur and other substances


that correspond to him for these reasons.


11.2. Any investment for evaluation, development or expenses of


operation attributable to the area of the contract shall be


considered as recoverable costs, except when same are specifically


considered as nonrecoverable in accordance with number 11.4 of


this contract.-


11.3. The recoverable costs attributable to the area of the


contract shall be assigned to the areas of exploitation, in


accordance with the General Registry and the Accounting Addendum,


in the following manner:


11.3.1. Those attributable to one area of exploitation will be


assigned to the area where they originated;


11.3.2. Those attributable to the area of evaluation will be


assigned to the areas of exploitation; and


11.3.3. Those attributable to one area of exploitation returned


to the State, nonrecoverable with the net production,


sulfur and other substances of the same area, shall be


assigned to other areas of exploitation within the same


area of the contract.


11.4. The following costs, expenses and investments will not be


considered as recoverable costs:





11.4.1. The investments in exploration, exploitation,


development, operation and any cost or expense that has


been incurred by the contractor prior to the effective


date or after the termination of this contract;


The costs, expenses and investments for the


11.4.2.


acquisition, purchase or leasing of materials, goods,


equipment and services rendered outside of the


Republic, when they can satisfactorily be produced or


 acquired within same;





11.4.3. The expenses for professional fees, earnings, salaries


and wages and other labor benefits paid to foreigners


that execute functions or labors that could be


satisfactorily performed by native Guatemalans;


11.4.4. The payments effected without any receipts or


bookkeeping in accordance with the law;


11.4.5. All of the financial costs and any liens which the


contract has . incurred in the financing ■ of the


operations derived ' from this contract, whether made


previously, during or after the effective date, as well


as the interests and any payment with respect to


financing the operations;





11.4.6. The dividends, royalties, participation, and any other


type of participation;


11.4.7. The general expenses for administration and for the


management of the main office, with the exception of


the percentages established for the benefit of the


authorized signatures set out in the Accounting


Addendum;


11.4.8. The payments effected to the State with regard to


royalties, fines and income tax;





11.4.9. The payments with respect to indemnification for


damages and/or prejudices caused to the State and/or


third parties, by the contractor, its contractors for


petroleum services, its subcontractors for the


aforementioned and any other person that renders


services, whether intentionally, whether by negligence


or imprudence;





11.4.10. Any cost, expense or investment that is effected for


superfluous or excessive ease or that is not reasonably


necessary to execute the petroleum operations in


accordance with the progress of the referenced approved


work ;





11.4.11. Any cost for transportation incurred after the point of


measurement or, when applicable, after the point of


joint measurement;


11.4.12. The costs or expenses assumed or incurred in the


commercialization of the hydrocarbons by the contractor


outside of the Republic;


11.4.13. The total amount in excess of the reasonable expenses


in accordance with the prices listed in the national or


international market, as the case may be, for every


class of goods, royalty rights and/or-' services of the


same . quality in the same period that the contractor


incurred them;





11.4.14. The costs for products, services and goods obtained


without quotation of prices or that have been divided


in order to obviate the requirement, when the same is


required in accordance with Regulation and the


Ac c ounting Addendum;





11.4.15. Any cost, expense or .investment not attributable to the


area of the referenced contract;





11.4.16. Any commission or expenditure concerning payment made


by the contractor, the contractors for petroleum


services or the subcontractors aforementioned by other


means;





11.4.17. The losses of goods and/or hydrocarbons that for


whatever reason, with the exception of sabotage, shall


have to be paid or reinstated as a consequence of not


having the respective insurance;


11.4.18. The costs and expenses derived from the intervention of


the operations when this is motivated by negligence or


imprudence on the part of the contractor; .


11.4.19. The donations, except for those that are made with the


written approval of.the Ministry;





11.4.20. The particular expenses of the personnel of the


contractor that, in part, are specified as follows:


income taxes, revenue stamp taxes, domestic services of


vigilance, telephonic, expenses of market, rates,


arbitrators and contributions to municipalities,


electric energy, tuition and expenses of schools for


children, rental of family vehicles and payment for


chauffeur, payment for enrollment and membership fees


in clubs, bar and restaurant expenses, receptions and


the like, language classes, deposits for rental of


homes, travel expenses for family to place of origin,


for more than one time per year, even when they are


comprised in the labor contract;


11.4.21. The payment for professional fees for professional


services rendered by individuals that do not have the


proper qualifications for same, when the laws of the


Republic require that they be rendered by individuals


properly qualified; and


11.4.22. The insurance premiums for the officials and the


remainder of the workers of the contractor when the


beneficiary shall be the contractor.-


TWELFTH CLAUSE


STATE PARTICIPATION IN THE PRODUCTION


AND REMUNERATION OF THE CONTRACTOR


12.1 The shared hydrocarbons comprise the net production of


hydrocarbons in each area of exploitation, less the volume of


corresponding hydrocarbons to the applicable royalties- and to the


recoverable costs attributable to the area of the contracts, in


accordance, with the Eleventh Clause of this contract.-


12.2 The state- participation in the production of shared


hydrocarbons, for each area of exploitation dealing with crude


petroleum and/or shared condensates, is set in accordance with the


following scale:





12.2.1. At forty percent (40%) when the net production is from


one (1) to fifteen thousand (15,000) barrels of


production per day;





12.2.2. After application of the specified percentage in the


aforementioned subparagraph, forty-five percent (45%)


of the net production for quantities that exceed


fifteen thousand (15,000) barrels of production per day


and does not surpass twenty-five thousand- (25,000)


barrels per day;


12.2.3. After application of the specified percentages in the


two (2) preceding subparagraphs, fifty percent (50%) of


the net production for quantities that exceed twenty-


 five thousand (25,000) barrels of production per day


and does not surpass thirty-five ■ thousand (35,000)


barrels per day;


12.2.4. After application of the specified percentages in the


three (3) preceding subparagraphs, fifty-five percent


(55%) of the net production for quantities that exceed


thirty-five thousand (35,000) barrels of production per


day and does not surpass forty-five thousand (45,000)


barrels per day,*


12.2.5. After application of the specified percentages in the


four (4) preceding subparagraphs, sixty percent (60%)


of the net production for quantities of production that


exceed forty-five thousand (45,000) barrels of


production per day and does not surpass fifty-five


thousand (55,000) barrels per day;


12.2.6. After . application of the specified percentages in the


five (5) preceding subparagraphs, sixty-five percent


(65%) of the net production for quantities that exceed


fifty-five thousand (55,000) barrels of production per


day and do not surpass sixty-five thousand (65,000)


barrels per day;


12.2.7. After application of the specified percentages in the


six (6) preceding subparagraphs, seventy percent (70%)


of the net production for quantities that exceed sixty-


five thousand (65,000) barrels of production per day


and does not surpass seventy-five thousand (75,000)


barrels per day;


12.2.8. After application of the specified percentages in the


seven (7) preceding subparagraphs, seventy-five percent


(75%) of the net production for quantities that exceed


seventy-five thousand (75,000) barrels of production


per day.





In each of the aforementioned subparagraphs, the


participation of the contractor shall be the complement of one


hundred percent (100%) of the percentage set out in each


subparagraph,-





12.3. The participation of the state in the shared production of


natural commercial gas and/or other substances is thirty five


percent (35%) and remuneration of the contractor for completion,


that is to say sixty-five percent (65%).


12.4. The participation of the contractor in the shared


production of hydrocarbons and/or other substances establishes the


total remuneration for the contractor's services and technical and


financial commitments assumed in accordance with this contract.-


12.5. When the Ministry chooses to receive in cash the royalty


and/or state participation in the production, the contractor shall


arrange, use, sell, commercialize and export said hydrocarbons and


other substances.-


12.6. In the event of production of crude petroleum stemming from


any discovery not declared as commercial, the. contractor, in


addition to paying the special royalty that is set out in number


iO.3. of this contract, shall pay a special state participation in


accordance with the scale set out in number 12.2 of this contract


and that established in the General Regulation; and the value of


the corresponding remaining crude petroleum will be credited to


the recoverable costs in accordance with the Accounting Addendum.-








THIRTEENTH CLAUSE


NATURAL GAS AND/OR OTHER SUBSTANCES


13.1. The natural ' gas shall be utilized, pending prior


authorization of the Board of Directors, primarily in the


operations of exploitation in the area of the contract, in


accordance to the decrees of the General Regulation.-


13.2. For each one of the areas of exploitation the contractor


will be able to process the natural gas and/or other substances in


accordance with the program for development that is presented for


every area, in accordance with the Law and the General


Regulation.-


13.3. In the event that the contractor projects the construction


of a processing plant for natural gas and/or other substances, the


State will be able to require that same have sufficient capacity


to process said types of substances from other areas of the


contract.-


13.4. The investments for the construction and the expenses of


operation for a processing plant for natural gas and/or other


substances shall be considered as recoverable costs, except for


 that set out in number 11.4 of this contract.








FOURTEENTH CLAUSE


SUPPLYING THE INTERNAL MARKET





The contractor is obligated, upon requirement of the


Ministry, to sell to the State, at the price set out' in number


15.2 of this contract, a prorated quantity of the hydrocarbons


produced that retain the concept of recoverable costs and/or


remuneration, as the case may be, that jointly with other


quantities, equally produced within the country by other


contractors, shall be sufficient to satisfy the total internal


consumption or until completion of fifty-five percent (55%) of the


totality of the hydrocarbons produced in the country, whichever is


more, in accordance with the General Regulation. The State shall


make use with priority the hydrocarbons that correspond to it for


internal consumption.-





FIFTEENTH CLAUSE


QUALITY, QUANTITY AND PRICES





15.1. The determination of the quantities of hydrocarbons, other


produced substances, and the analysis for determination of the


quality of same, shall be verified by the Board of Directors, in


charge of same and approval of the instruments, and other


applicable procedures and norms. -


15.2. In order to determine the effective perquisite, such as the





state participation in the production of shared hydrocarbons in


cash, the value of the volume of hydrocarbons retained by the


contractor to recuperate costs and/or remuneration or to determine


the value of the volumes of hydrocarbons sold to the State to


satisfy internal consumption, shall be applied to the market price


of. hydrocarbons adapted to the point of measurement, or when it is


the "joint point of measurement, determined in accordance with the


Law of General Regulation.-








SIXTEENTH CLAUSE


GOODS





16.1. The State is the proprietor of the hydrocarbons discovered,


as well as the information, data, reports, interpretations of


same, and the samples resulting from the original petroleum


operations in the execution of the contract.-


16.2. The machinery, equipment, installations and other movable


property or landed property acquired by the contractor and related


to the area of .the contract, in order that the same shall be


recoverable with priority in accordance with that established in


the Eleventh Clause of this contract, upon termination of the


contract for any reason and in the event that this should occur,


it shall become the property of the State, without cost in the


state that imported them, acquired or constructed, to the inherent


imperfections in the natural and prudent use of the same.-


16.3. During the term of this contract, the contractor shall have


the authority to make exclusive use, free from charges such as


leasing of the goods referred to in the previous number 16.2, for


the fulfillment of the compromised operations that are the object


of this contract, giving the contractor the absolute


responsibility for maintaining, insuring, and any other cost or


public service or other kind associated for the proper functioning


of same, which shall be considered as recoverable costs, except


for that set out in numeral 11.4 of this contract.-


16.4. When the cost of the goods has been partially or totally


recovered, the contractor is prohibited to make any transfer,


mortgage ■ or exportation of said goods, except with the previous


written authorization of the Ministry, in which case the revenues


that are obtained shall be credited to the recoverable costs, in


accordance with the Accounting Addendum.-


16.5. In case of loss of goods for fraud or negligence on the


part of the contractor, which cost had been partially or totally


recovered in accordance with the contract, the contractor shall


assume all the losses and the replacement of said goods, which


shall not be included within the recoverable costs in the area of


the contract. -


16.6. In case the contractor decides to sell goods from his


assigned property to the operations of evaluation and exploitation


derived from the execution of this contract, the State shall have


the preferential right to acquire said goods for the value


indicated in the accounting books of the contractor, applicable as


the case may be, as set out in Article 23 6 of the General


Registry. The preferential right aforementioned, shall be


exercised by the Ministry within thirty (30) regular days


following the date of receiving notification from the contractor


of the intention to sell. The Law and the General Regulations


will be applied concerning the regulation for exonerations. -








SEVENTEENTH CLAUSE


INFORMATION, DATA AND CONFIDENTIALITY


17.1. The Board of. Directors shall provide the contractor with


its {illegible word: discovery?) in writing, the information and


technical data that it- has in its possession, concerning the


pertinent areas of the contract.-


17.2. The contractor is obligated to provide to the Ministry


and/or to the Board of Directors all of the information, data,


compilations and interpretations, originated in the execution of


this contract, as the case may be, in accordance with the guides,


circulares and instructions that are applicable. Likewise, .the


..contractor shall be obligated to provide, at any given moment, the


additional information or clarification concerning the operations


of evaluation and exploitation that the Ministry or its


dependencies request.-


17.3. The contractor shall have the right to petition certain


information that has been given to the Ministry and/or the Board


of Directors in accordance to the previous number, to be


considered confidential for the parties, during the non-extendible


period of two (2) years counting from the date of the receipt of


the corresponding information. Said information will cease to be


confidential before the time period indicated in the case of any


of the following circumstances:





17.3.1. The contract is terminated for any reason;


17.3.2. A call of bids is produced in the first part of the


first paragraph of subparagraph 8.3.3 of this contract;


17.3.3. Within the indicated term or on the effective date of


devolution of any area, whichever occurs first; and


17.3.4. That established in Article 131 of the General


Regulation.-





17.4. At any given moment, the Board 'of Directors shall inspect,


by means of the procedures that it considers convenient, all of


the operations and will prove the validity of the information that


is referred to in this Clause,-


17.5. In order to execute the operations in compliance with the


contract, the' contractor shall be able to retain and make use of


the information and data referred to in this Clause, except for


that set out in numbers 16.1. and 17.2. of this contract.


EIGHTEENTH CLAUSE


SUPERVISION OP THE OPERATIONS


18.1. The Government shall exercise the inspection, supervision,


control and vigilance of the operations which are the object of


this contract, as well as the results and consequences, by means


of the Ministry and its dependencies, in accordance with the Law.-


NINETEENTH CLAUSE


DETERMINATION OP THE CONSTANT VALUES


19,1 The fines that are referred to in numbers 9.4. and 9.5. of


this contract, the amounts that are referred to in numbers 21.2.


and 23.1. of this contract, as well as the administrative rates


that the contractor will . have to pay in accordance with this


contract, shall be adjusted annually by the Ministry in order to


correct same for reasons of inflation, in accordance with


Article 288 of the General Regulation, however, such adjustment


shall not be more than eight percent (8%) annually. With regard


to the referenced article, let it be understood that part of the


formula that refers to the variations of the official rates of


exchange for the value of quetzal respective to the value of the


"dollar, will not be applicable.-


TWENTIETH CLAUSE


MONETARY EXCHANGE TRANSACTIONS


20.1. For purposes of exchanges derived form this contract, the,


national money will have the official value of the legally


established rate of exchange.-


20.2. The contractor may remit to the exterior the amounts


equivalent to unexported volumes of hydrocarbons, which relate to


the concept of recoverable costs and/or remuneration, in


accordance with that established in Article 33 of the Law and the


regulations emitted by the Monetary Board of Directors in


compliance with decree number JM hyphen one hundred thirty-two


hyphen eighty-four (JM-132-84) , published in the Diario Oficial


the twenty-eighty (28th) day of June of nineteen hundred and


eighty four (1984).


20.3. The contractor should invest within the country the foreign


currency that corresponds to the State from the production of


hydrocarbons and/or ■ other substances that are exported - in


accordance with the. concept of royalties and/or participation in


the production, after having supplied the internal market in


accordance with the Fourteenth Clause of this contract.-


TWENTY-FIRST CLAUSE


TAXES AND OTHER PAYMENTS


21.1. The contractor shall pay the taxes, charges and


administrative rates in accordance with Articles 34/ 35 and 45 of


the Law.-


21.2. The contractor shall pay, in accordance with the Law and


the General Regulation, the following annual charges:


21.2.1. Fifty cents on a dollar (U.S. $0.50) per complete


hectare in the area of the contract that is in the


phase of evaluation. For the effects of these charges


they shall be treated in accordance with that set out


in Article 261 of the General Regulation;


21.2.2. Five dollars (U.S. $5.00) per complete hectare that has


the area(s) of exploitation in the area of the


contract; and


21.2.3. Any change that the contractor effects in the program


that is not significant, upon approval of the Ministry,


will not be effected in the rate set out in Article 258


of the General Regulation.-








TWENTY-SECOND CLAUSE


MEASURES FOR SECURITY AND PROTECTION OF THE ENVIRONMENT





22.1. During the development of the operations for evaluation and


exploitation derived from the execution of this contract, the


contractor is obligated to fulfill all of the measures for


security in accordance with the norms of the international


petroleum industry that are necessary for the protection of


individuals, and goods, as well as the prevention of contamination


in compliance with the applicable legal provisions and the


stipulations of this contract.-


22.2. In the event that it has not been possible to avoid


contamination, the contractor shall be responsible for elimination


of same, as technically feasible, upon judgment of the Ministry


without prejudice to being subject to applicable fines, and in


accordance with the Law shall respond for damages and/or


prejudices caused to the State or to third parties.-


22.3. At any given moment the Ministry may order the contractor,


to take measures that are deemed necessary to safeguard the


security of persons and their goods, whether within the area of


the contract or outside of•it but related with the'operations that


are the object of this contract.-


TWENTY-THIRD CLAUSE


TRAINING OF GUATEMALAN PERSONNEL


23.1. The contractor is obligated to contribute to the training


of Guatemalan personnel, in accordance with General Regulations,


with the following amounts:


23.1.1. Solely during the evaluation period, twenty-five


thousand dollars (U.S. $25,000.00) for each year of the


contract;


23.1.2. From the date of the establishment of the first


commercial field, in substitution of that set out in


the previous number, by area of the contract, each


calendar year shall be paid according to the following


scale:


23.1.2.1. When the net production of crude petroleum coming


from the area of the contract for the previous


calendar year, is less than one hundred fifty


thousand (150,000) barrels of crude petroleum it


shall be thirty seven thousand five hundred


dollars (U.S. $37,500.00);





23.1.2.2. When the net production of crude petroleum per


previous calendar year coming from the area of the


contract is the same or more than one hundred


fifty thousand (150,000) barrels of crude


petroleum and less than three hundred thousand


(3 00,000) barrels, that agreed to in the previous


number 23.1.2.1. shall be substituted for Seventy-


five thousand dollars (U.S. $75,000.00);


23.1.2.3. When the net production of crude petroleum per


previous calendar year coming from the area of the


contract, is more than three hundred thousand


(300.000) barrels of crude petroleum and less than


five hundred thousand (500,000) barrels, that


agreed to in the previous number 23.1.2.2. shall


be- substituted for one hundred twenty-five


thousand dollars (U.S. $125,000.00); and


23.1.2.4. When the net production of crude petroleum for- the


previous calendar year, coming from the area of


the contract is more than five hundred thousand


(500.000) barrels and less than seven hundred


fifty thousand (750,000) barrels, that agreed to


in the previous number 23.1.2.3. shall be


substituted, by one hundred eighty thousand, dollars


(U.S. $180,000.00);


23.1.2.5. When the net production of the crude petroleum for


the previous calendar year, coming from the area


of the contract is more than seven hundred and


fifty thousand (750,000) barrels and less than one


million (1,000,000) barrels, that agreed to in the


previous number 23.1.2.4. shall be substituted by


two hundred and forty thousand dollars


(U.S. $240,000.00).





23.1.2.6. When the net production of the crude petroleum for


the previous calendar year, coming from the area


of the contract is more than one million


(1,000,000) barrels and less than three million


(3,000,000) barrels, that agreed to in the


previous number 23.1.2.5. shall be substituted by


three hundred sixty thousand dollars


(U.S. $360,000.00); and


23.1.2.7. When the net production of the crude petroleum for


the previous calendar year, coming from the area


of the contract is more than three million


(3,000,000) barrels, that agreed to in the


previous number 23.1.2.6. shall be substituted by


four hundred and eighty thousand dollars (U.S.


$480,000.00).-


23.2. The contractor shall train the Guatemalan personnel in its


service about the .operations that it executes in order for them to


be effectively trained with the knowledge and techniques required


to efficiently conduct the operations for evaluation and


exploitation, in accordance with the regulation that is emitted


for this effect.-'


23.3. The parties will be able to jointly execute agreements for


studies or investigation, concerning the procedures and techniques


that the contractor employs in the development of the petroleum


operations derived from this contract.. Said agreements may be


regarding, without limitation, the following: frequent


consultations, joint -studies, discussions concerning technical


problems, interchange of technology for the operation between the


experts of the Ministry and the personnel of the contractor.


Likewise, the experts of the Ministry shall, with the consent of


the contractor, participate in the scientific investigation and


the development of the operations- conducted by the contractor


within the country or in the exterior. -








TWENTY - FOURTH CLAUSE


PREFERENCES


24.1 The contractor shall, in the development of operations,


utilize, with preference, Guatemalan products, goods, services and


personnel in accordance with the Law and the General Regulation.-


24.2 The contractor shall provide to the Ministry, each calendar


year, a detailed report concerning that agreed to in this clause.-








TWENTY-FIFTH CLAUSE


HIGHWAYS AND WORKS OF SOCIAL ASSISTANCE


25.1. The contractor shall maintain in good condition the


highways or roadways utilized within the area of the contract for


the sound execution of the petroleum operations of the contract.-


25.2. With regard to the works of social assistance the following


is agreed:


25.2.1. To provide every type of medical assistance to the


workers that shall be necessary and reasonable.


25.2.2. In accordance with the Ministry, the company shall


construct the works that are convenient, which


investment shall be a maximum of one hundred and fifty


thousand dollars (U.S. $150,000.00) per year.


25.2.3. With regard to the environment, the company shall


comply with that set out by the laws, and regulations


that regulate .the material and this contract.-


25.3 The investments and expenses that are incurred by the


contractor as a consequence of that established in this Clause,


shall be considered as expenses of operation and shall be included


as recoverable costs, except for that set out in number 11.4 of


this contract.-





CLAUSE TWENTY-SIX


INDEMNIFICATION AND ASSURANCE


26.1. The contractor is obligated to indemnify, in accordance


with applicable laws of the Republic, the State, the proprietors


of the lands, or to any other individuals to whom there is damage


and/or prejudice caused due to the activities or works originated


in this contract, whether the same are caused by the same


contractor, or by his contractors for petroleum services or the


subcontractors of the prior mentioned or any other person that


renders services, inclusive of those derived from the


contamination of the environment. -


26.2. For effects of this Clause, the contractor shall be


obligated to show, in compliance with the General Regulation and


the Law, that the parties agree that this contract will


automatically terminate for the following causes:


26.1.1. If the Contractor does not realize a commercial


discovery, before the end of the second year of the


contract; and





26.1.2. For termination of the term of the contract.-


26,2-The following are causes for non-automatic termination of the


contract:


26.2.1. An unexpected financial or technical incapacity of the


Contractor or the Contractor's main office, which is


manifested during the development, of the operations


26.2.2. If a judicial declaration exists for bankruptcy or the


creditors file a legal lawsuit, within the country or


in the exterior;


26.2.3 If the Contractor' or his assignees transfer the


contract, totally or partially, without having complied


with that set out in Article 18 of the Law;


26.2.4. If the Contractor presents false or intentionally


■ incomplete information and, repetitively, obstructs the


duties of the Ministry;


2 6.2.5. If the Contractor habitually disregards or is in grave


non-compliance with this contract, it shall be


understood that this is a grave noncompliance


concerning the obligations set out in the contract, and


as a result, a particularly considerable detriment is


caused to the State, whether economic, environmental or


of another kind, in accordance with the judgment of the


Ministry;


26.2.6. If the Contractor repeatedly gets behind in his payment


of the royalties or the state participation in the


production of hydrocarbons and/or other substances;


26.2.7. If the Contractor disposes of the goods which cost was


partially or totally recovered in accordance with the


contract, without authorization of the Ministry;


26.2.8. When.the Contractor does not renew the guaranty for the


compliance that is referred to in Clause Nine of this


contract;





26.2.9. When, the commercial production is finalized for all the


areas of exploitation in the area of the contract; and





26.2,10. If the operations for development and/or commercial


production should cease for a period of ninety (90)


 days (...remainder of 26.2.10 missing in Spanish


contract)





...guaranties that shall be necessary, as a last resort that


shall be credited before the Ministry in one period of


one month counting from the date of notification of the


respective decrees.-


26.3 The Contractor shall insure the goods referred to in number


16.2 of this contract.-


TWENTY-SEVENTH CLAUSE


FORTUITOUS CAUSE OR FORCE MAUEURE








27.1. The lack of compliance by any one of the parties with the


obligations ■ or conditions established in this contract, shall


excuse same during the time that the event that causes the


noncompliance, when same is caused by a fortuitous cause or force


majeure.-


27.2. For effects of this Clause, fortuitous causes or force


majeure shall b& considered: Wars, insurrections, earthquakes,


thunder storms, inundations and other causes or adverse


meteorological conditions, or any other happening which the


contractor cannot reasonably prevent or control. The exceptions


are events caused by lack of observation of generally accepted


practices of the International Petroleum Industry or by the


negligence and/or lack of prudence of the contractor, any of his


employees or his contractors for petroleum services or


subcontractors of the previous . -


27.3. If it becomes impossible for one of the parties to comply


with any of the obligations or conditions stipulated in this


contract, due to a fortuitous cause or force majeure within the


Republic, the other party in the respective clause shall be


immediately notified in writing of the cause of the


noneomplianc e.-


27.4. If the contractor is unable to comply with the obligations


due to a fortuitous cause or force maj eure outside of the


Republic, the parties shall meet to consult for the purpose of


reaching satisfactory arrangements in order that the operations


for exploitation can be continued in the most adequate manner for


the interested parties.-


 27.5 The party affected by a fortuitous cause or force majeure


shall fulfill the obligations within a reasonable period,


according to mutual agreement between the parties.-








TWENTY-EIGHTH CLAUSE


TERMINATION OF THE CONTRACT





28.1. In addition to the termination clauses foreseen in the...


(missing words in.....Spanish contract) ... consecutive days, except


for a fortuitous cause or force majeure, dutifully proven.-


28..2. ( ,28 .,2 , missing paragraph in Spanish,contract.) .





28.3. If the noncompliance of the obligation or condition


stipulated in this' contract is for a' fortuitous cause or force


majeure, dutifully proven, occurring outside of the Republic, and


is prolonged for more than twenty-four (24) consecutive months,


then any of the parties shall have the right to consider the


contract .terminated and, in such case, the parties remain excused


from all the obligations set out in the contract and . the Law,


which would have been complied with subsequent to- the happening of


the event that caused the fortuitous cause or force majeure.-


28.4. If upon the judgment of the Ministry there is cause to


initiate the non-automatic termination of a contract, same shall


be adhered to the. procedures established in Article 57 of the


General Regulation.-








TWENTY-NINTH CLAUSE





EXPRESS DECLARATION





The contractor expressly declares that he assumes all of the


obligations set out in this contract, and if necessary, to respond


to legal matters in the Republic, which shall be done .not only


with the goods that are owned within the National territory, but


also with- those that are- owned in the exterior.-





(THIRTIETH CLAUSE





(. . .MISSING TITLE AND TEXT OF THIRT ajaam 3---.CLAUSE


IN..SPANISH CONTRACT. . J


 THIRTY-FIRST CLAUSE





LAWS, JURISDICTION AND INTERPRETATION


31.1 The contractor is obligated to complete all of the previous


provisions in the Law of Hydrocarbons, Decree of Law number 109-83


revised by Decree of Law number 161-83, the General Regulation


contained in Government Agreement number 1034-83 and its


amendments, and further regulations that are generally applicable


to all the Contractors for exploration and/or exploitation.


Furthermore, the Contractor shall be subject to the further laws


of the Republic.-


31.2. In matters related to litigation concerning the


application, interpretation, execution and termination, for any


reason, of this contract the contractor expressly renounces any


foreign domicile for this action and submits to the jurisdiction


of the courts in the City of Guatemala. It is understood that the


contractor, contractor for petroleum services, subcontractors for


petroleum services or their partners, that are foreigners, shall


not appeal, in any manner, to the complaint by means of diplomatic


protection, concerning the application, interpretation, execution


and termination, for any reason, of this contract.-


31.3. This contract shall be interpreted as one total document


and no provision of same, by itself, shall have any relevance,


validity or significance, or if same has omitted from its


significance and existence the other provisions contained in the


Law and the Regulations. The name given to each Clause does not


have any objective except for reference to information and does


not form an integral part of this contract. If some party of this


contract becomes invalid due to a contradiction with the legal


provisions, the validity of the remaining parts shall not be


affected.-








THIRTY-SECOND CLAUSE


NOTIFICATIONS


32.1. For all notifications, citations, notices or


communications, the parties have elected the following Board of


Directors:


 MINISTRY OF ENERGY AND MINES Diagonal 17, 29-70, zona 11


Telex: 5510 PETGUA GU


Ciudad de Guatemala


Guatemala, Centro America





PENTAGON PETROLEUM, INC. 23 Avenida "A" 0-42, Zona 15


Vista Hermosa 11, Apto. 7C


Fax: 89-2370


Ciudad de Guatemala


Guatemala, C.A.





32.2. All notices, reports or communications that are to be made


by the contractor or operator, as the case may be, to the


Ministry, related to the petroleum operations, shall be in writing


in the Spanish language.-.


32.3. All of the notifications, citations, notices and





communications that are made by the Ministry and its dependencies


to the contractor, and vice versa, shall be understood to be


effective ' in the place that is indicated in number 32.1 of this


Contract


32.4. As the case may be, once the operator for the petroleum





operations derived as a result of this contract is designated and


approved, any notification, citation, notice or communication and


others related to a technical character between the Government and


the contractor shall be exclusively directed to the operator and,


as a consequence, will put the contractor under obligation.


32.5. The parties may change the addresses set out in number





32.1. of this Contract, but must notify the other party, in


writing, of the change of address. Otherwise, proper notice will


be at the address previously given.-








THIRTY-THIRD CLAUSE


OPTION FOR GUATEMALANS


The contractor is obligated to give native Guatemalans the


option, as set out in Article 144 of the Political Constitution of


the Republic of Guatemala, to participate in the petroleum


operations with capital contributions that represent a minimum of


five percent (5%) of the total works undertaken for the first


_ three years of the contract, according to the Specific


Regulation.-








THIRTY-FOURTH CLAUSE


INCORPORATED DOCUMENTS


The Accounting Addendum forms an integral part of the


contract


The undersigned swear that we have read the entire document


herewith and are well informed of its contents, validity and legal


effects, we ratify, accept and sign the _ pages, in the City of


Guatemala, the fifteenth (15th) day of October of nineteen hundred


and ninety-three (1993). -


BY THE MINISTRY: (Signature)


BY THE CONTRACTOR: (Signature)





In' the City of Guatemala, the fifteen day of October of nineteen


hundred and ninety three, AS NOTARY PUBLIC, I DECLARE: That the


previous signatures are authentic by having been signed in my


presence on this day by the Engineer Jose Luis Terron Calderon,


and Mrs. Maria Elizabeth Galves Salazar, who act in the capacity


of Minister of Energy and Mines and Legal Representative of


Pentagon Petroleum, Inc., representations that I have witnessed


and that are sufficient in my judgment for the execution of this


act; that they are persons known to me and again sign with the


notarial inscribed on the present act of legalizing signature.


(Signature) (Signature)





(Signature)


Before me: Pedro Leone1 Brolo Campos


Attorney and' Notary


 ACCOUNTING ADDENDUM





ACCOUNTING ADDENDUM FOR THE CONTRACT FOR EXPLOITATION NUMBER SIX


HYPHEN NINETY-THREE (6-93) EXECUTED BETWEEN THE MINISTRY OF ENERGY


AND MINES AND PENTAGON PETROLEUM, INC. THE FIFTEENTH DAY OF


OCTOBER OF NINETEEN HUNDRED AND NINETY THREE- (10/15/93).








SECTION I


DEFINITIONS


In addition to the definitions contained in the Law and in


the General Regulation, for the effects of this Accounting


Addendum, shall be the following:


CAPITAL ASSETS: Is comprised of capital assets for useful living,


limited or unlimited, that is owned or acquired for use in the


services and processes of any center or subcenter of costs of the


petroleum operations.


SAVINGS: Is the reduction of costs or expenses obtained by means


of elimination, employment or application and adoption of measures


or actions for better exploitation of the financial resources


realized, by the Contractor, in whichever of the margins of the


center or subcenter of costs that are the subject matter herewith,


during the execution of the budget, complied with in part or


activity of the program of the respective work.


APPENDIX: Are the joint forms that the Contractor shall utilize


for the effects of the elaboration, presentation and revision of


the budgets, which form part of this Accounting Addendum.


AUDIT: In the inspection of the field, the cabinet and any other


technical procedure, financial or accounting effected by the


Department of Audits and the Board of Directors, each one within


its capacity, that permits verification of investments in


exploration, the development and expenses of operation, like the


execution of the program for work.


CENTER FOR COSTS: Is the centralization of costs, expenses and


investments derived from the execution of a program for the work


of this Contract; and is divided in subcenters for costs.


FISCAL YEAR: Is the lapse of one year of the contract, during the


period of exploration, and one calendar year during the period of


exploitation.





QUALIFICATION BOARD: Is integrated in accordance with Article 2 81


of the General Regulation.


PLACE OF DESTINATION: Is the area of the contract, including the


common system, central offices in Guatemala and warehouses of the


Contractor.


MATERIALS AND SUPPLIES: Are the tangible and/or functional goods


utilized in the petroleum operations, with the exception of those


classified as fixed assets.


GENERAL ITEM: Is the general division of a subcenter of costs in


recoverable costs, nonrecoverable costs and the credits that


correspond to the aforementioned.


SUBCENTER OF COSTS: Is the division. of one center of costs, in


accordance with that set out in number 1 of the Appendix.


RATE OF EXCHANGE: Is the average rate for purchase of dollars in


national currency that has been realized, in the banks that


habitually operate in money exchange, the third Friday of every


month or the next regular day.


TRANSFER: Is the importation into the country or re-exportation


of capital assets, materials and/or supplies that are property of


the Contractor of the company affiliated with same, or when


applicable, of the contractor for petroleum services or


subcontractors for the aforementioned. It is also the


mobilization between two or more areas of the contract, when they


correspond to the same Contractor.


VALUE OF NOTE: Is the original cost of acquisition of capital


assets, materials and supplies, less the discounts, plus the


services for freight, insurance and other similar costs paid to


third parties from the place of ■ purchase. to the place of


destination.








SECTION II


GENERAL DISPOSITIONS





2.1 Object of the Accounting Addendum:


The object of this Accounting Addendum is the establishment


of the procedures necessary for the presentation and content


of budgets, acquisition of goods and services, inventories,


audits and revisions of the costs, expenses and investments,


in order to establish the recoverable costs, the state


participation and the remuneration to the Contractor.


2.2 Accounting Systems:


The Contractor shall be able to. use the system for accounting


that is esteemed convenient, observing the generally accepted


principles of accounting and the legal purposes that


correspond to same, whenever he complies with that set out in


number 2.1. of this Addendum.


2.3 Management Office:


The Contractor shall establish and operate in the City of


Guatemala, management office, .which shall be responsible for


the accounting records that are necessary.


2.4 Copies:


For effects of this Accounting Addendum, the Contractor shall


present to the Ministry or its Dependencies an original and


three copies each of the corresponding documents.


2,5. Amplification of the Rates of Exchange:


For effects of that set out in number 2.4 of the Contract,


the rate of exchange determined for one calendar month shall


be applied to all of the expenditures effected or other class


of operations for the following month,, without prejudice to


that established in numbers 6.4.1, 6.4.4 and 6.4.5 of this


Addendum.


2.6 Monetary Unit:


The Contractor, without prejudice to that set out in numeral


2.2 of this Addendum and for the effects of this Contract,


shall register, in dollars, all of the mercantile operations


that have the objective of payment for services or other


expenditures, when said payments are effected in national


currency the Contractor shall convert them into Dollars


utilizing the applicable rate of exchange on the month that


the subject operation was realized.


 2.7 Mutual Agreement:





It is understood that in the event future changes are made


that substantially modify the actual system of exchange, the


parties agree to adjust the Accounting Addendum as needed.


SECTION III


CONTENTS OF THE BUDGET


Each budget of exploration and exploitation shall contain, in


separate form, the expenditures to be made in dollars and national


currency, ,in accordance with centers of costs with the codes that


are set out in detail in number (1) of the Appendix of this


Addendum.


3.1 The Budget of Exploration shall contain the following centers


of costs:'


lOCosts and expenses to be incurred outside of the Republic;


20Costs and expenses to be incurred within the Republic; and


30 Investments of exploration.


3.2 The Budget of Exploitation shall contain the following


Centers of Costs:


lOCosts and expenses to be incurred outside of the Republic ;


20 Costs and expenses to be incurred within the Republic;


41 Investments of development, set out separately for each


of the areas of exploitation;


30 Investments of development of the common system;


61 Expenses of operation, set out separately for each of


the areas of exploitation; and


_0 Expenses of operation of the common system.


3.3 Subcenters of Costs :


The centers of costs identified in the previous numbers shall


be incorporated, as the case may be, with the following


subcenters of costs:


001 General administrative expenses.


These comprise the expenses incurred by the Main Office of


the Contractor outside of the P.e public, as well as those


incurred by the Contractor within the Republic, necessary for


the realization of the . functions of the planning,


organization, integration and control, which the executive


administration' is in charge of, in order to jointly


accomplish the optimum administration of the company. It


includes, among others: professional fees, wages, salaries


and other benefits and emoluments paid to executives and


employees that integrate the offices of the General


Management and Financial Office, the services of accounting,


internal audit, computation, legal consultation, public


relations, the acquisition and rental of the building,


furniture, equipment, vehicles and other' assets of general


use in administration; the construction of installation and


their maintenance; acquisition of materials, implements,


utensils and supplies; contract for services and all similar


expenditures' not attributable to the other centers of costs.


101 Geology.


These comprise the expenses that are of a technical nature


which include wages and salaries, superficial operations of


field, studies of the subsoil, paleontology, ■ geochemical,


photogeological, ■ remote, sensors, studies of age of


sedimentary rocks and any other kind of related technical


studies.


151 Geophysics:


These are expenditures made for wages and salaries of


technical personnel, of aeromagnetic 'investigations, of


gravity and seismic studies, operations related to processing


and reprocessing of geophysical data.


201 Well of exploration number 1.


These are expenditures that comprise the works regarding the


drilling and/or testing of evaluation of the exploratory well


number 1, as well as wages and salaries of technical


personnel. Other exploratory wells, shall be -subject to


Codes 252 through 300, concerning same. -


__ Well of evaluation.number 1.





These are expenditures that comprise works relating to


drilling and/or tests of evaluation of exploratory well


number 1, and includes wages and salaries of technical


r











personnel. Other exploratory wells, shall be subject to


Codes 252 through 300, concerning same.


3 01 Well of development number 1.


These are expenditures that comprise works relating to





drilling and/or tests of evaluation of development of well


number 1. ...(missing words from 301 of the Spanish contract)


...technical. Other development wells, shall be subject to


Codes 302 through 500, concerning same.


501 Terminals.





These comprise expenditures for preparation of the land,


construction, maintenance and expenses of operation of


terminales, as well as wages and salaries of technical


personnel.


551 Lines of flow.





These comprise the expenditures related to the construction,


improvement, maintenance and expenses of operation of the


lines of flow.


601 Logistics and transportation.





These are expenses related, among others, to the wages and


salaries of technical personnel, construction, improvement,


maintenance of highways, fields, aerodromes, heliports and


any other transportation service, like the supply of


materials and necessary supplies for the field personnel.


651 Buildings, warehouses and land.





These are expenses related to the purchase, construction,


maintenance of buildings, warehouses and lands, as well as


wages and salaries of field personnel.


701 Plant and equipment.


These are expenses made for the purpose of construction,


improvements, maintenance and expenses of operation of plants


of separation, purification, processing, liquefying or


improvement and injection of hydrocarbons; sulfur plants and


other subproducts or petroleum or natural gas, as well as


wages and salaries of technical personnel.


751 Service, maintenance and cleaning of wells.


These are expenses made for the purpose of the maintenance,


operation, service and cleaning of wells.


801 Training' of Guatemalan personnel, welfare and social


assistance and other payments to. the State.


These are expenses made in order to comply with the


contractual compromises.


851 Other studies.


These comprise the expenses related, among others, to the


economic studies related to petroleum activity.


3.4 Integration of the centers of costs:


The centers of .costs' shall be integrated with the following


general items of expenditure: Recoverable costs,


unrecoverable costs', credits against recoverable cos-ts and


credits against nonrecoverable .costs; and the respective


subcenters of costs.





Each item of expenditure shall comprise the following groups


of expenses:





Group 0 Personnel Services


Group 1 Non-Personnel Services


Group 2 Materials and Supplies


Group 3 Capital Assets


Group 4 General Administrative Expenses


Group 5 Incidentals





These are subdivided,'respectively, into areas of expenses in


compliance with the structure of form number 2 of the


Appendix to the Accounting Addendum.





3.5 Conformation of the budgets.





The conformation of the budgets shall be done in accordance


with form number 2 of the Appendix which shall be integrated


in the following manner:





3.5.1The first column shall record the codes that identify the


items of expenditure.


3.5,2The second column shall record the codes that identify the


names of the items of expenditure, the expenses and


investments of the subcenter of cost referenced


thereto;


3.5.3 The third column shall record the values of the budget


presented by the contractor. This column shall be


divided into, three subcolumns in order to register in


the first two, the expenditures in dollars as well as


in national currency and in the third column only in


dollars. The values recorded in national currency


shall, be converted to dollars according to the


applicable rate of exchange the second month prior to


the month in which it is presented.


In all' of the subcolumns the recoverable costs and


nonrecoverable costs, shall be considered.


3.5.4The fourth column shall be reserved for use by the Ministry,


who shall approve the budget that is referred' to in


dollars, as well as 'the recoverable costs as well as


nonrecoverable costs. -


3.6 Special Items of Expenditure for Incidentals.


This item for expenditure shall be ten percent (10%) of the


total recoverable costs excluding this item of expenditure,


and there shall be established from the subcolumn that sets


forth the values of recoverable costs in dollars, said


percentage may be applicable at any center of costs,


according to the special circumstances that are applicable.


In case of reduction or increase of the recoverable costs


expressed in dollars, the amount of incidentals will be


modified in a proportional manner.


SECTION IV


PRESENTATION AND APPROVAL OF BUDGETS


The Contractor shall present the budgets for exploration


and/or exploitation, in accordance with Chapter V, Title II


of the General Regulation, utilizing for its effect the form


number 2 of the Appendix and the delineations of its


application. Its approval shall only be effected in dollars.


 SECTION V





CHANGE OF BUDGETS





5.1 CHANGES:


The contractor may make changes or revisions to the'budgets,


in accordance with that set out in number 5.3 • of this


Addendum, in the following cases:


5.1.IFor reasonable expectation of the special items . of


expenditure of' incidentals when same is insufficient to


cover excesses during the execution of the approved


work program;


5.1.2For changes or amplifications to the work program; and


5.1.3 For emergency reasons.


5.2 SAVINGS IN A BUDGET:


When the contractor obtains savings in any of the items of


expenditure of a subcenter of costs, after having complied


with the work program, he may transfer them, with the object


of covering the insufficiency of the special items of


expenditure of incidentals, or he may assign them directly to


other subcenters of costs of the came center of costs,


utilizing form number 2 of the Appendix, same which shall be


informed to the Ministry, within the following month from the


date in which it took place.


5.3 Procedure in case of changes to,budgets:


For change to budgets, in accordance with that set out in the


previous number 5.1, the contractor shall present an


application to the Board of Directors, in accordance with


that established in article 114 of the General Regulation,


utilizing form number 2 of the Appendix.


, Upon approval of the referenced requested change in the


budget, it will be adjusted proportionately, concerning items


of expenditure of incidentals.


 SECTION VI


EXECUTION OF BUDGETS





6.1 Transference:


Budgetary' transference will not be permitted,, except in the


following cases:


6.1. lFroxn the items of expenditure of incidentals to any subcenter


of costs;


6.1.2The 'revisions effected in compliance with the previous


section V;


6.1.3Those that are clearly justified before the Ministry; and


6.1.4 When the budgetary transference are effected in the same


subcenter of costs of one type of currency to another


utilizing the applicable rate of exchange.


6.2 Assignment of Costs:


In case of existing costs and expenses that involve various


areas of exploitation, the Contractor shall assign them to


the following centers of costs: 50, Investments of


development of the common system, and 70, expenses of


operation of the common system, whichever the case may be,


following that set out in article 213 of the' General


Regulation.


6.3 General Administrative Expenses:


6.3.1 Incurred within the Republic: The Administrative and


Management Expenses incurred by the Contractor within


the Republic shall be acknowledged annually as


recoverable, determined by means of a detailed study


and the procedure established by said study shall be


applied in the analysis of each budget. Said procedure


shall be approved by the Ministry which shall be


reviewed periodically by same or upon petition of the


Contractor;


6.3.2 Incurred outside the Republic: The Administrative and


Management Expenses incurred by the main office of the


Contractor outside of the Republic shall be


acknowledged annually as recoverable, which shall be


calculated using as a base the total recoverable costs


approved from each budget, expressed in dollars, in


compliance with the procedures indicated in the


following numbered subparagraphs:


6.3.2.1 Four percent (4%) for the recoverable costs up to five


million dollars (U.S. $5,000,000.00);





6.3.2.2 After applying the specified percentage in the previous


number, three percent (3%) for recoverable costs which


are more than five million dollars (U.S. $5,000,000.00)


and up to ten million dollars (U.S. $10,000,000.00);


6.3.2.3 After applying the specified percentage in the two


previous numbers, two percent (2%) for recoverable


costs which are more than ten million dollars


(U.S. $10,000,000.00) and up to fifteen million dollars


(U.S. $15,000,000.00);





6.3.2.4 After applying the specified percentage in the three


previous numbers, one percent (1%) for recoverable


costs which are more than fifteen million dollars


(U.S. $15,000,000.00);


6.3.2.5 The expenses of the executives of the main office of


the Contractor that are effected within the national


territory, shall remain included within number 6.3.2.


6.4 Quotations:


The regiment of quotations established by Article 218 of the


General Regulation, remains subject to the following


specifications:





6.4.IThey are duty free, and as such, operations to buy goods and


supplies in one sole act or to contract for works and


services which, are less than ONE HUNDRED THOUSAND


DOLLARS (U.S. $100,000.00) or the equivalent in,


national currency, at the rate of exchange established


for the month immediately prior to the date in which


the decision is realized to execute the operation with


a certain individual person or corporation.


6.4.2The quotations shall be regimented by minimum bases or


specifications and shall establish criteria for


selection, among those who can depict: characteristics,


quality, availability, price, time for delivery,


technical assistance and of replacement, guaranty of


the nature of the good, of the work or the service.


6.4.3The Ministry and the Contractor shall submit a mutual


agreement setting forth the general guidelines of the


functions and attributes of same to the Qualification


Committee.


6.4.4The purchase in one sole act of the goods and supplies or


contracting the works and services which are more than


the indicated investment in the previous number 6.4.1


and less than FOUR HUNDRED THOUSAND DOLLARS


(U.S. $4,000,000.00) or the equivalent in national


currency, according to the rate of exchange established


for the month immediately preceding the date in which


the decision was made to realize the operation with a


certain individual person or legal entity, is subject


to quotations. In this case the minimum bases and the


criteria for selection shall be determined by the


Contractor. The participation of the Qualification


Committee shall be contracted monthly for it to have


the knowledge . of realized operations, which sole


objective is to establish-the award taken into account,


the' minimum basis or specifications, and the criteria


for' the selections adopted,' for the effects of its


approval.


6.4.5The purchase in one sole act of the goods and supplies or


contracting of works and services which are more than


FOUR HUNDRED THOUSAND DOLLARS (U.S.' 400,000.00) or its


equivalent in national currency, according to the rate


of exchange established for the month .immediately


preceding the date in which the decision was made to


realize the operation with a certain individual person


or legal entity, shall be informed to the Ministry


prior to the execution of same. In this case, the


determination of the minimum basis and the criteria for


selection shall be by mutual agreement of the Ministry


and the Contractor. The award shall be effected by the


Qualification Committee.


6.4.6For the formal effects of the quotations, whatever the amount


may be, the following instructions shall be complied:


6.4.6.1 Number of 'Invitations;





There will be mailed a minimum of five (5) invitations to the


entities that the Contractor considers are' able to


provide or loan the goods, supplies, works or services


that are required for the petroleum operations.


In the event the contractor cannot comply with the number of


invitations referred to in the previous paragraph,' he


shall justify such extreme with due documentation.


6.4.6.2 Opening of Seal:


The bids shall be presented in sealed envelopes, which shall


be opened on the date and hour set by the persons


designated for same by the 'Contractor or for the


members of the Qualification, Committee, as the case may


be.


6.4.6.3 Study of Bids:


At the time of opening and acknowledging- the bids presented


there shall proceed, directed by those persons in


charge or the total Members of the Qualification


Committee, as the case may be, with analysis of same


and with application to the criteria for selection and,


according to these requirements, award to the most


convenient bidder.


4.6.4Bids presented by telex and by other means, originating from


persons or entities domiciled in the exterior:


When in a quotation there are participants other than the


bidders domiciled in the country, other persons or


entities with domiciles in the exterior, or only these


last mentioned, and in accordance with, the minimum


basis established they are permitted to make their bids


by telex or by other means of acceptable communication,


that pet out in point 6.4.6.2 of this subnumeral shall


not be applicable nor enforceable with respect to the’


opening of seals.


4.7 In addition to the exception contained in subnumeral 6.4.1


there is also an exception to this requisite for quotations


for the purchase of goods and supplies or contracting of


works and services necessary in any of the cases of emergency


set out in Article 115 of the General Regulation.


4.8 When practicable, it shall be requested that amplifications


and/or clarifications be made of the bids presented or if


these do.not complete the requirements established, the event


shall be declared deserted and it shall proceed to initiate a


new quotation.


5 Valorization of the entrance of place of destination:


5.1 The capital assets and materials obtained by purchase shall


be valued at the place 'of destination, in accordance with the


value of the invoice, according to the type of 'currency which


were used to acquire same. In case the value is national


currency, its conversion to dollars shall be determined in


accordance with the applicable rate of exchange.


5.2 The capital assets and materials .obtained by transfer shall


be valued according to the value of the. original invoice in


dollars and when the value of same is expressed in national


currency this value shall be converted to dollars in


accordance with the rate of exchange applicable in compliance


with the following procedure:


5.2.1The capital assets and new materials shall be valued in


accordance with the price of acquisition, in accordance


with the value of the original invoice in dollars and


when the value of same is expressed in national


currency, this value shall be converted to dollars in


accordance with the rate of exchange applicable in


accordance with the following procedure:


5.2.2The capital assets and used materials, in good condition,


shall be valued at seventy-five percent (75%) of the


value of the original invoice; and


5.2.3The capital assets and used materials, in need of some repair


or improvement, shall be valued at fifty percent (50%)


of the value of the original invoice.


6b Valuation of departure:


In case the Contractor accomplishes any sale or transfer of


capital.assets or materials, which cost shall have been charged as


recoverable, in 'the execution of the private operations of the


contract, they shall be valued with the type of currency in which


they were acquired in accordance with the following procedures:


6.1 The capital assets and new materials shall be valued at the


same value established in subnumeral 6.5.2.1.


6.2 The capital assets and used materials shall be valued in


their place of exit in the following manner:


6.2.1Used in good condition: These shall be valued at seventy-


five percent (.75%) of its value approved as recoverable


costs in dollars or its equivalent in national currency


at the applicable rate of exchange;


6.2.2Used in condition of use with, some repair or improvement,


these shall be valued at fifty percent (50%) of the


value approved as recoverable cost in dollars or its


equivalent in national currency at the applicable rate


of exchange;


6.2.3Scrap or waste products: these are priced at their value as


discard, with previous agreement between the parties.


6.3 When the State acquires the capital assets of the Contractor


that had not been considered as recoverable, same shall


buy them in compliance with that set out in number 16.6


of the Contract.


The indicated price in the accounting books of the Contractor


that are referred to is the value in dollars or its


equivalent in national currency in accordance with the


applicable rates of exchange.





SECTION VII


REPORTS


7.1 Report of budgetary execution:


In compliance with that established in Articles 224 and 240


in subparagraph g) of the General Regulation, the Contractor


shall present to the Board of Directors, a monthly report of


completion of the budgetary execution that is at hand, using


the forms that shall be emitted by means of circulares. Said


report shall include, as a minimum, the following details:


7.1.iThe approved budget;





7.1.2The changes effected;


7.1.3The actualized budget;


7.1.4The total costs, expenses, investments executed in the month


that is at hand indicating which were effected in


dollars and which in national currency. That executed


in national currency shall be converted to dollars


according to the applicable rate of exchange.


7.1.5The accumulation of costs during the months of the year that


is at hand shall be presented only in dollars;


7.1.6The estimated percentage of advance of the program of work


with respect to advance of the execution of the


executed budget, the advance of the aforementioned


shall be presented in dollars as well as in national


currency.


7.1.7The total costs, expenses and investments effected in the


month that is at hand indicating the expenditures in


dollars and those realized in national currency. The


expenditures effected in national currency shall be


converted to dollars according to the applicable rate


of exchange.


7.2 Summary of Report:


The contractor shall present every trimester a summary report


of the budget that is at hand, in accordance with that


established in subparagraphs a and b of Article 240 of


the General Regulation with respect to the total sums


that includes the indicated information in the previous


numbers. In this report all of the amounts shall be


expressly in dollars. For purposes of recoverable


costs they shall be understood to be costs effected by


all those that on the date of presentation of trimester


report have been really paid, without prejudice to


those costs that were paid after the presentation of


the referenced report, which may be included the


following trimester.








SECTION VIII


 CONTROL AND VERIFICATION OF COSTS





For the effects of control and verification of recoverable


costs in accordance with ■ the Law, the General Regulation, the


contract and this Accounting Addendum., the procedures shall be as


follows:


8.1 Verification of Costs.


The reports that the contractor presents shall be reviewed,


analyzed and evaluated jointly by the Board of Directors and


the Department of the Auditor.


8.2 Audits.


The Department of the Auditor shall realize audits with the


objective of establishing, among other things, the veracity


of the contents in the reports that the contractor presents.


As well as to verify that the accounting operations that are


set out comply with that indicated in Sections VI and VII,


respectively in the Addendum, fundamentally with regard to


the valorization of revenues and 'expenses of capital assets


and materials; and if the amounts that same report are backed


by the corresponding legal document.


SECTION IX


CONTROL OF INVENTORIES'





9.1 Inventories.


The contractor shall keep' a perpetual inventory by any


acceptable recognized means of valuation and the same shall


value it in dollars. At least, once a year within the second


trimester of said year, the contractor shall keep a fiscal


inventory of capital assets, materials and supplies, existing


on the date of the close of accounting that is treated here.


For this purpose,' he shall' notify in writing to the


Ministry, thirty .(30) days in anticipation of the date in


which he proposes to make said inventory, with the objective


that this one name his representative; the omission of


representation, on the part of the Ministry, shall not


invalidate the results that are caused, however, these should


present to the Ministry within one month after the inventory


is practiced.


9,2 Adjustments:





The adjustments of the inventory by excesses or deficiencies


of more than one thousand dollars ($1,000.00) shall be made


known to the Ministry for his consideration and resolution,


and when it refers to a deficiency of capital assets, the


value of same shall be credited to the recoverable costs.


SECTION X


APPROVAL OF RECOVERABLE COSTS


10.1 Verification of Awarded Bids:


In the case of quotations approved for an award of bid by the


Qualifying Committee, the amount or tariffs of same shall be


considered recoverable, except if the auditor determines


defects in the award, in the purchase of goods and supplies


oir the contract of works and services.


10.2 Trimester for Approval.


Once the trimester for approval has terminated, the General


Board of Directors shall grant to the contractor five (5)


days in which to appear and deliver a copy of the costs that


are not acceptable as recoverable by the auditor, for the


purpose of establishing his compliance or noncompliance.


Once the indicated time period has ended, with or without a


response to it, the General Board of Directors and the


Department shall proceed to elaborate upon joint agreement to


that set out in Article 229 of the General Regulations.


SECTION XI


AUXILIARY DOCUMENTATION


In addition to the accounting system that shall be maintained


for other reasons, the Contractor shall maintain auxiliary


accounting records concerning the group and region by centers


and subcenters of the costs, for the purpose of verifying if'


the settlement of accounts, in which the recoverable and


nonrecoverable costs are recorded, coincides with the


execution of the budget.





The contractor shall maintain a record on the rate of


 exchange.





11.1 Source Document.


Every accounting operation shall be backed by a document that


fulfills the legal requirements and corresponding evidence.


The exception to this are entries of adjustment and others of


a similar nature, which shall be explained with clarity and


shall be authorized by the Chief of the Financial Division or


the Chief of the Department of Accounting of the contractor.


11.2 Charges.


For the purpose of charges, the following groups of items of


expenditure shall be taken into account:


11.2.1 Personnel Services: These shall comprise, among


others, wages and salaries for technical personnel,


administrative and management, field workers,


maintenance, medical, paramedic, laboratory; temporary


personnel contracted to fill in for work that cannot be


done by permanent personnel, such as some kind of legal


advisory, economic studies, technical service of


supervision, acting official; also including overtime


for those that work extraordinary time, expenses for


representation and labor services.


11.2.2 Non-Personnel Services: These shall comprise, among


others, expenses for executed contracts with


contracting companies for petroleum services, and other


contracts for transportation and maintenance; studies


and assessment, leasing of offices, machinery,


equipment and their repairs, including expenses


concerning the telephone, telegraph, telex,


correspondence, electricity, water service, maintenance


of equipment for the office and field, expenses of


photocopies and heliograph, various freights,


commissions, subscriptions' and publications, expenses


for transportation of personnel and materials, with the


exception of the transportation included in the value


of the invoice of the fixed assets, materials and


supplies.


11.2.3 Materials and Supplies: These shall comprise, among


others, drills and tricones, diamond crowns, mud,


cement, additives, tubular material, well heads; food,


 clothing, tires and-spare .tires, insecticides, sanitary


products, medical products, pharmaceutical products,


combustibles and lubricants.





11.2.4 Fixed Assets: These shall comprise, among others,


land, buildings, plants, installations, constructions,


routes -of communication, extraordinary repairs, welfare


and social assistance, machinery and equipment- for


exploration, and for exploitation of production,


-equipment for medical laboratory, for engineering, for


construction, for communication, for office computers,


for heavy and semi-light transportation, aerial, ocean


and fluvial, storage tanks, warehouses, field, field


vehicles, city vehicles, furniture, lines of flow and


other equipment or machinery.








11.3 Credits.





For purposes of the corresponding credits, the following


items of expenditure shall be taken into account:





11.3.1 Personnel Services: These comprise credits forthcoming


from the items. of . expenditure included in this group


that shall be designated as recoverable costs.


11.3.2 Non-Personnel Services: These comprise credits


forthcoming from the items of expenditure in this


group, that are designated as recoverable costs; as


well as the product of the sale of any study for the


same reason, benefits received for insurance claims,


indemnifications received for damages and any other


reimbursement related with this group.





11.3.3 Materials and Supplies: These comprise credits


forthcoming from the sale, re-exportation and


utilization in another activity different from those


set out in the contract, of materials and supplies that


were approved as recoverable costs.


11.3.4 Capital Assets: These comprise credits forthcoming


from the sale, re-exportation, final goods after


execution of the activity at the end of the period and


utilization or in another activity different from those


considered in the contract for goods and that were


approved as recoverable costs.


 The product of the sale of materials or capital assets that


are referred to in the Sixteenth Clause of the


Contract, shall be credited to the recoverable costs,


in accordance with that set out in number 6.6 of the


Accounting Addendum.


Likewise there shall be credited to recoverable costs the





balance of ■ the production of crude petrol exam that is


referred to in Article 214 of the General Regulation.


11.4 Differed Charges and Credits:


Each accounting entry is independent of any other, and as





such, shall include the deferment for charges and credits at


the close of the accounting entry that relates to it.





11.5 Adjustments:


The accounts for charges and credits shall permit adjustments





of plus or minus, by means of corrections or annulments.


11.6 Special Closing.





The contractor shall effect a closing at the end of each year


of the contract, for the period of exploration that shall


permit verification by an audit of the recoverable, costs


during the year of the contract, independent of that set out


in Article 228 of the General Regulation.








SECTION XII


RECORDS AND PROCEDURES FOR DETERMINATION


OF STATE PARTICIPATION AND


REMUNERATION OF THE CONTRACTOR


For the purpose of determining recoverable costs, state


participation in the production of shared hydrocarbons,


remuneration of the contractor and applicable adjustments made,


all of the calculations shall be effected in Dollars. For these


effects the following entries and procedures shall be established


and applied as explained herewith:


ACCOUNTS AND ENTRIES: The contractor, for purposes of effective


recovery of his costs and expenses incurred in dollars or in


national currency converted into dollars, shall maintain specific


 control of accounts, like for joint or individual entries.


12.1 Accounts of specific control:





12.1.1 A joint account, that documents the total recoverable


costs for the centers of costs 10, 20, 30, 50 and 70;


12.1.2 An individual account, that documents the total


recoverable costs for centers of costs 41, 61, etc., of


the area of exploration and for each area of the


exploitation;


12.1.3 An account that documents the value of the net


production, determined in accordance with the General


Regulation, for each area of exploitation; and


12.1.4 An account that documents the royalties paid that are


attributable for each one of the areas of exploitation.


12.2 Joint and individual entries:





Each of the four columns shall conform, as a minimum, with


those that are recorded monthly to the total of:


12.2.1 The recoverable costs accumulated up to a determined


month;


12.2.2 The recoverable costs up to said determined month;


12.2.3 The recoverable costs incurred in the month that is at


issue (that is the one following the month determined


before) approved as recoverable costs; and


12.2.4 The balance of recoverable costs. This is obtained by


subtracting the 'total from column 12.2.1, the total


from the column 12.2.2, and to that result the total is


added in the column 12.2.3,_ for the indicated month.


(Illegible.........subtitle and.....some of the text in the....Spanish, contract)


Officially it shall be considered that the reimbursement of


the costs . . . that are joint to all types of areas of


exploitation, following, ■ . . . availability, the costs and expenses


shall be recovered, from that which comes from the production of


hydrocarbons that is at issue; and finally, if there is still a


remnant, this shall constitute part of the shared hydrocarbons.


 12.3 Recovery of joint costs and expenses.





The recoverable costs of the joint entry by month shall be


assigned in accordance with the following procedures, that


consist of:





12.3.1 Establish the availability of recoverable costs by


areas of exploitation, which shall be the result of


subtracting the total amount from subnumeral 12.1.4,


from that contained in subnumerai 12.1.3 of this


Addendum;


12.3.2 Add the total disposable recoverable amounts of costs


from all the areas of exploitation of the area of the


contract;


12.3.3 Take the total of these joint costs and expenses that


are recoverable set out in subnumeral 12.2.4 of this


Accounting Addendum;


12.3.4 Compare the total amounts established in


subnumerals 12.3.2 and 12.3.3 of this Accounting


Addendum, the lesser shall be the total assigned for


recovery of the joint costs and expenses in the month


that is at issue;


12.3<5 Transfer the net production for the areas of


exploitation, established in subnumeral 12.1.3;


12.3.6 Obtain the total net production of the area of the


contract;


12.3.7 Divide the obtained result in subnumerai 12.3.3 by the


result obtained in subnumerai 12.3.6, the quotient


shall be the factor assigned to the joint costs and


expenses per area of exploitation? and


12.3.8 Calculate the assignation of joint costs and expenses


per area of exploitation by multiplying the factor


obtained in subnumeral 12.3.7 by the total amount


determined in subnumeral 12.3.4, both contained in this


Accounting Addendum.





12.4 Recovery of individual costs and individual expenses:


The recoverable costs of the individual entry, by month and


 by area of exploitation, shall be assigned in accordance with


the following procedure that consists of:





12.4.1 Subtract from the amount established in accordance with


subnumeral 12.3.1, the assignation calculated according


to subnumeral 12.3.8. If the result is negative or


zero, .there shall be no reimbursement costs and


expenses to the individual entry; if the result is


positive, the following step shall be applicable;


12.4.2 Subtract from the amount of the costs and expenses of


the individual entry that appears in the subnumeral


12.2.4, from the disposable balance contained in


subnumeral 12.4.1. If said balance is not enough to


cover the total recoverable costs and expenses of the


individual entry, the excess of these shall remain due


for reimbursement for the following month.


12.5 Determination of shared hydrocarbons.


This phase is applicable when the outcome reported in the


previous subnumeral 12.4.2 is a positive balance according to


the following procedure, which consists of:


12.5.1 Subtract the amount of the net production for every


area of exploitation, established according to


subnumeral 12.1.3, the value of the respective


royalties, set out in subnumeral 12.1.4;


12.5.2 Subtract next the amount of the assignation of joint


costs and expenses, established according to subnumeral


12.3.8; and


12.5.3 Subtract the amount of the individual reimbursement of


costs, established according to subnumeral 12.2.4.


When the resulting value at the end is negative or


zero, there shall be no shared hydrocarbons; and if the


value results positive, likewise, the percentages


established in the contract shall be applied in order


to determine the participation of the State and, the


remuneration of the contractor.





12.6 Each trimester there shall be adjustments established and if


there are any they shall be applied before subtracting the


total amounts according to subnumerals 12.5.2 and 12.5.3 of


this Accounting Addendum.


12.7 The corresponding percentage to the state participation in


the production of crude petroleum and/or shared condensates


for each area of exploitation in accordance with Article 212


of the General Regulation, shall be calculated in the


following manner:


12.7.1 When the net production of'an area of exploitation does


not exceed fifteen thousand (15,000) barrels of


production per day, the percentage of state


participation in the production of crude petroleum


and/or shared condensates is equal• to forty percent


(40%).


12.7.2 When the net production of an 'area of exploitation


exceeds- fifteen thousand (15,000) barrels and does not


surpass twenty-five thousand (25,000) barrels of


production per day, the percentage of state


participation in the crude petroleum and/or shared


condensates is equal to one hundred (100) multiplied by


the sums of the results obtained in the following


subparagraphs, divided by the daily net production of


the area of exploitation:


a) Fifteen thousand (15,000) multiplied by forty hundredths


(0.40);


b) The difference between the daily net production of the area


of exploitation and fifteen thousand (15,000)


multiplied by forth-five hundredths (0.45);


12.7.3 When the net production of an area of exploitation


exceeds twenty-five thousand (25,000) barrels and does


not surpass thirty-five thousand (35,000) barrels of


production per day, the percentage of state


participation in the crude petroleum and/or shared


condensates is equal to one hundred (100) multiplied by


the sums of the results obtained in the following


subparagraphs, divided by the daily net production of


the area of exploitation:


a) Fifteen thousand (15,000) multiplied by forty hundredths


(0.40);


b) Ten thousand (10,000) multiplied by forty-five hundredths


(0.45);


 c) The difference between the daily net production of the area


of exploitation and fifteen, thousand (15,000)


multiplied by fifty hundredths (0.50).


12.7.4 When the net production of an area of exploitation


exceeds thirty-five thousand (35,000) barrels and does


not surpass forty-five thousand (45,000) barrels of


production per day, the percentage of state


participation in the crude petroleum and/or shared


condensates is equal to one hundred (100) multiplied by


the sums of the results obtained in the following


subparagraphs, divided by the daily net production of


the area of exploitation:


a) Fifteen thousand (15,000) multiplied by forty hundredths


(0.40);


b) Ten thousand (10,000) multiplied by forty-five hundredths


(0.45);


c) The difference between the daily net production of the area


of exploitation and thirty-five thousand (35,000)


multiplied by fifty hundredths (0.50);


d) ' The difference between the daily net production of the area


of exploitation and thirty-five thousand (35,000)


multiplied by fifty-five hundredths (0.55).


12.7.5 When the net production of an area of exploitation


exceeds forty-five thousand (45,000) barrels and does


not surpass fifty-five thousand (55,000) barrels of


production per day, the percentage of state


participation in the crude petroleum and/or shared


condensates is equal to one hundred (100) multiplied by


the sums of the results obtained in the following


subparagraphs, divided by the daily net production of


the area of exploitation:


a) Fifteen thousand (15,000) multiplied by forty hundredths


(0.40);


b) Ten thousand (10,000) multiplied by forty-five hundredths


(0.45);


c) Ten thousand (10,000) multiplied by fifty hundredths (0.50);


d) The difference between the daily net production of the area


of exploitation and thirty-five thousand (35,000)


multiplied by fifty-five hundredths (0.55);


e) The difference between the daily net production of the area


of exploitation and forty-five thousand (45,000)


multiplied by sixty hundredths (0.60).


12.7.6 When the net production of an area of exploitation


exceeds fifty-five thousand (55,000) barrels and does


not surpass sixty-five thousand (65,000) barrels of


production per day, the percentage of state


participation in the crude petroleum and/or shared


condensates is equal to one hundred (100) multiplied by


the sums of the results obtained in the following


subparagraphs, divided by the daily net production of


the area of exploitation:


a) Fifteen thousand (15,000) multiplied by forty hundredths


(0.40);


b) Ten thousand (10,000) multiplied by forty-five hundredths


(0.45) ;


c) Ten thousand (10,000) multiplied by fifty hundredths (0.50);


d) Ten thousand (10,000) multiplied by fifty-five hundredths


(0.55) ;


e) ■ Ten thousand (10,000) multiplied by sixty hundredths (0.60);


f) The difference between the daily net production of the area


of exploitation and fifty-five thousand (55,000)


multiplied by sixty hundredths (0.65).


12.7.7 When the net production of an area of exploitation


exceeds sixty-five thousand (65,000) barrels and does


not surpass seventy-five thousand (75,000) barrels of


production per day, the percentage of state


participation in the crude petroleum and/or shared


condensates is equal to one hundred (100) multiplied by


the sums of the results obtained in the following


subparagraphs, divided by the daily net production of


the area' of exploitation:


a) Fifteen thousand (15,000) multiplied by forty hundredths


(0.40);





b) Ten thousand (10,000) multiplied by forty-five hundredths


(0.45);


c) Ten thousand (10,000) multiplied by fifty hundredths (0.50);


d) Ten thousand (10,000) multiplied by fifty-five hundredths


(0.55);


e) Ten thousand'(10,000) multiplied by sixty hundredths (0.60);.


f) Ten thousand (10,000) multiplied by sixty-five hundredths


(0.65);


g) The difference between the daily net production of the - area


of exploitation and sixty-five thousand (65,000)


multiplied by seventy hundredths (0.70).





12.7.8 When the net production of an area of exploitation


exceeds seventy-five thousand (75,000) barrels of


production per day, the percentage of state


participation, in the \ crude petroleum and/or shared


condensates is equal to one hundred (100) multiplied by


the sums of the results obtained in the following


subparagraphs, divided by the daily net production of


the area of exploitation:





a) Fifteen thousand (15,000) multiplied by forty hundredths


(0.40);





b) Ten thousand (10,000) i multiplied by forty-five hundredths


(0.45);


c) Ten thousand (10,000) multiplied by fifty hundredths (0.50);


d) Ten thousand (10,000) multiplied by fifty-five hundredths


(0.55);


e) Ten thousand (10,000) multiplied by sixty hundredths (0.60);


f) Ten thousand (10,000) multiplied by sixty-five hundredths


(0.65);


g) Ten thousand (10,000) multiplied by sixty-five hundredths


 (0-70);





h) The difference between the daily net production of the area


of exploitation and seventy-five thousand (75,000)


multiplied by seventy-five hundredths (0.75).


SECTION XIII


OTHER ENTRIES


13.1 For control of the production of crude' petroleum from one


well that is not declared as commercial, the contractor shall


keep the following entries:


13.1.1 The volume of the production of crude petroleum


obtained in accordance with that set out in Article 211


of the General Regulation, during the period of


testing;


13.1.2 The amount of special royalty paid for the production


mentioned in the previous subnumeral;


13.1.3 The' amount of the .special- state participation that is


referred to in Article 2.1.4 of the General regulation;


and


13.1.4 The amount that corresponds to the contractor, after


having effected the special royalty and the special


state participation, shall be credited to the


recoverable costs of the program of exploration of the


area of the contract.


13.2 For purposes of that stipulated in the second paragraph of


Article 143 of the General Regulation, the contractor shall


maintain the accounts that record the net production of


natural gas., as well as the other substances, for each one of


the areas of exploitation.


SECTION XIV


CHANGES AND DISCREPANCIES





14.1 Changes.





Any change or modification of this Accounting Addendum,


*








proposed by the contractor, as well as by the Ministry, shall


be recognized by the totality of the contractors that operate


in the country.


In any event, any applicable change affecting all of the


contractors shall be incorporated into this Accounting


Addendum, emitted for effective ministerial decision.


14.2 Discrepancies.


In the event there are any discrepancies between the


stipulations set out in the contract and in this Accounting


Addendum, the stipulations in the contract shall prevail.


 APPENDIX TO THE ACCOUNTING ADDENDUM


FORM NUMBER I


CODIFICATION FOR THE CENTERS AND SUBCENTERS OF COSTS


CENTERS FOR COSTS








SUBCENTERS l l 415061 70


OF COSTS 102030


H


001 10001 20001


101 10101 20101 30101 41101


151 10151 30151 41151


201 30201 41201


202 30202 41202


203 30203 41203


251 30251 41251


301 41301


302 41302


303 41303


501 30301 41501 50501


70501


551 30551 41551 50551


70551


601 30601 41601 . 50601


70601


651 20651 30651 41651 50651


70651


701 30701 41701 50701


70701


751 30751 61751


801 ■ 30801 41801 61801


70801





851


70851 10851 20851 30851 41851 50851 61851





' Includes areas of exploitation that are set out In Codes 41


to 49; and of exploitation of 61 to 69.


n This subcenter shall be in accordance with the percentage


specified in Section VI of this Accounting Addendum.


Which are the following:


10 "Costs and expenses incurred outside of the Republic.


20 " Costs and expenses for support incurred in the


Republic.


30 "Investments of exploration.


41 "Investments of development per area of exploitation.


50 "Investments of development of the common system.


61 "Expenses of operation for each area of exploitation.


70 "Expenses of operations for the common system.


001 "General administrative expenses.


101 "Geology.


151 "Geophysics.


201 "Exploratory well number 1.


202 "Exploratory well number 2.


2 03 "Exploratory well number 3, etc.....


251 "Well for evaluation number 1.


301 "Well for development number 1.


302 "Well for development number 2.


303 "Well for development number 3, etc....


501 "Terminals.


551 "Lines of flow.


601 "Logistics and transportation.


651 "Buildings, warehouses, and lands.


701 "Plants and equipment.


751 "Service,■maintenance and cleaning of wells.


801 "Training of Guatemalan personnel, schools, hospitals,


development of technology and other payments to the


State.


851 "Other studies


The centers of costs indicated in Appendix Ho. 1 correspond


to those mentioned in Article 215' of the General Regulation, in


which:


a) The center for costs identified in No. 10, responds to that


mentioned in subparagraph c) of the budget of the program for


exploration, as well as in subparagraph f) of the budget for


the program of exploitation.


b) The center for costs identified in No. 20, responds to that


mentioned in subparagraph b) of the budget for the program


for exploration and subparagraph _) of the budget for the


program of exploitation.


USE OF FORM NUMBER 1 OF THE


APPENDIX TO THE ACCOUNTING ADDENDUM


For budgetary purposes to be applied to different investments


for exploration and development to centers and subcenters of


costs, the following shall describe how to effect their


interaction, and shall amplify them with the corresponding


explanation and requirement, which is the objective of that


demonstrated in the sample FORM NUMBER 1 that comprises the


Appendix of this Accounting Addendum.


Center of costs 10 (costs and expenses to be incurred outside of


the Republic) :


There shall only be applied: the expenses coming from the


subcenters of costs of Geology, Geophysics, the expenses related


to other studies, as well as the general administrative expenses


incurred by the Main Office outside of the Republic.


Center of costs 20 (costs and expenses for support to be incurred


within the Republic):


There shall be applied: the expenses coming from the


subcenters for Geology, those related with purchasing,


construction, maintenance and operation of buildings, warehouses


and lands; and those related' to other studies, as well as the


general administrative expenses incurred by the contractor within


the Republic.


Center of costs 30 (investment for exploration):


There shall be applied:' the expenses related to all of the


subcenters of costs specified in Section IV of this Accounting


3* ftr











Addendum, with the exception of those expenditures which


correspond to the works effected for the drilling and tests for


evaluation of the wells of development identified in the


subcenters of costs 301, 302 and 303, as well as the general


administrative expenses identified in the subcenter for costs 001.


Center of costs 41 (investments in development for areas of


exploitation):


There shall be applied: the expenses related to all of the


subcenters of costs specified in Section IV of this Accounting


Addendum, with - the exception of those that refer to general


administrative expenses identified in subcenter of costs 001 and


service for cleaning of the well identified in number 751.


Center of costs 50 (investments in development for common


systems):





There shall only be applied: the expenses related with the


following subcenters of costs: Terminals, identified in number


501, lines of flow, identified in number 551, logistics and


transportation, identified in number 601; those originated in the


purchase, construction, maintenance and operation of buildings,


warehouses and lands, identified in. number 651, as well as plants


and equipment identified in number 7 01 and other studies


identified in number 851.


Center for costs 61 (costs for operation of each area of


exploitation):


There shall only be applied: the expenses coming from the


subcenters of costs related with the service, maintenance and


cleaning of the wells, identified in number 751, those related to


the training of Guatemalan personnel, and those coming from other


studies identified in numbers 801 and 851, respectively.


Center for costs 70 (expenses of operation of the common system):





There shall only be applied: the expenses coming from the


subcenter for costs classified as terminales, lines of flow,


logistics and transportation, buildings, warehouses and land,


plant and equipment, those related with the training of Guatemalan


personnel and those coming from other studies.




















Or -


 APPENDIX TO THE ACCOUNTING ADDENDUM


FORM NUMBER 2








Budget for Program of: -----------------------------


(Exploration, exploitation, etc.)





NAME OF THE CONTRACTOR:


YEAR OF THE CONTRACT: FROM TO





CENTER OF COSTS CODE:





SUBCENTER OF COSTS CODE:


APPLICABLE RATE OF EXCHANGE:





Codes Concept Budget Budget


Presented Approved


US.$ Q. Total U.S. $ US $








0 PERSONNEL SERVICES





011 Wages and salaries


012 Wages for temporary and contract work


013 Overtime


014 Expenses for representation


015 Labor services, rendered


016 ..Other items of expenditure





1. NON-PERSONNEL SERVICES





111 Geology and geochemical


112 Geophysics


113 Highways


114 Logistics and transportation


115 Drilling


116 Fluids for drilling


117 Electrical registrations


118 Cementing wells


119 Testing the well


120 Completion of the well


121 Reconditioning of well


122 Other contracts


123 Maintenance


124 Insurance and bonds


125 Other items of expenditure


 IPPE1PXX TO' THE ACCOUNTING ADDENDUM (Cant.)


FOIM NUMBER 2








2. MATERIALS AND SUPPLIES








211 Expenses for food


212 Clothes for field workers


213 Metallic products


214 Non-metallic products


.215 Chemical products


216 Medical and pharmaceutical products


217 Combustibles and lubricants


218 House furniture


219 Other items of expenditure





3'. ' CAPITAL ASSETS





311 Machinery and equipment for exploration and production


312 Equipment for storage and distribution


313 Machinery and used equipment


314 Medical surgical equipment


315 Engineering equipment


316 Laboratory equipment


317. Transportation equipment


318 Computer equipment


319 Lands and buildings


320 Miscellaneous





4. GENERAL ADMINISTRATIVE COSTS





411 Total administrative expenses





SUBTOTAL


5. INCIDENTALS








511 Incidentals for


TOTAL








This group of expenses with their respective items of


expenditure, shall only be used to present the budget


for the center of costs 10 and subcenter of costs 001.


6330- 8 February of 1994





DIARIO DE CENTRO AMERICA NUMBER 24